Financial advisers should picture themselves before the regulator when deciding whether to use in-house managed account products for clients, Lonsec believes.
The research house said while managed accounts had the potential to create significant efficiency gains and improve investment outcomes, they could risk creating a conflict trap that would put their entire business at risk.
Lonsec head of wealth management sales, Tony Nejasmic, said managed accounts needed to be done with the client’s best interest in mind and that would mean asking questions about an adviser’s investment capabilities, fee structure, and governance framework.
“The test is to picture yourself before the regulator and ask yourself if you have a clear justification for placing the majority of your clients’ funds in your own managed account products,” he said.
“If you’re unsure of the answer, then you’re likely not offering the best value for your clients and you’re likely not fulfilling your best interest duty.”
Lonsec said it was essential that managed accounts were used for efficiency purposes, did not involve additional fees, were free of perceived conflicts, and utilised professional investment managers for portfolio construction.