Advisers using managed accounts triple in last decade

A new report evaluating advisers’ attitudes and use of managed accounts has highlighted its sustained popularity, with exchange-traded funds (ETFs) among the most popular products in these portfolios.

The report by Investment Trends and State Street Global Advisors (SSGA), which surveyed 632 advisers, found that 56 per cent used managed accounts today, rising from 17 per cent 10 years back. Additionally, 22 per cent were potential users themselves. 

The findings of the 14th SPDR ETFs / Investment Trends Managed Accounts Report backed recent research by IMAP and Milliman that funds under management (FUM) in managed accounts had increased to $144.5 billion by the end of December 2022, up by 9.8 per cent from the previous year.

Sinead Schaffer, SSGA’s vice president and ETF model portfolio strategist, noted the sustained adoption of managed accounts was “a reflection of their ability to support advisers’ holistic approach to financial planning.”

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“Advisers using managed accounts direct 41 per cent of new client flows into them, a four-fold increase from 10 per cent a decade ago,” she said.

“In addition, managed account users allocate, on average, 76 per cent of their clients’ total investable assets into managed accounts.”

Affluent clients with $250,000 to $1 million to invest were the key client segment for advisers recommending managed accounts.

Per the report, two in five current users said clients between 35 and 49 years of age were appropriate to hold the majority of their portfolio in managed accounts.

Over a quarter of respondents believed managed accounts were appropriate to hold the majority of the portfolio for self-managed super funds (SMSFs). 

When it came to how managed accounts affected an adviser’s services, respondents said it contributed to a change in their value proposition. 

Some 45 per cent said they had greater focus on client goals when using managed accounts, while 39 per cent of advisers specified their value proposition had changed to outsource portfolio construction to professionals. 
Moreover, advisers reported that they or their support staff saved an average of 17.1 hours a week using these accounts.  

The research also indicated that multi-asset class models were the most commonly used managed account, comprising almost three-quarters of recommended models. 

Separately managed accounts (SMAs) on the platform were the most widely used structure (86 per cent). 
When it came to products, ETFs were the most popular product in these portfolios over the past year (63 per cent). 

Schaffer added: “Further, a third of potential managed account users would like to see more ETFs as the underlying products within managed accounts.”

“Whilst performance and fees remain important factors for advisers when recommending managed accounts to their clients, these considerations are becoming less important as time goes on,” said Sarah Brennan, advisory board chair at Investment Trends.

“Factors such as availability on investment platforms, then the reputation of the asset manager, are becoming more prevalent.”

She added that these accounts had proved “remarkably resilient” to seismic global economic and political shocks.

“The report found that 41 per cent of financial advisers believe the current economic conditions and geopolitical events have had ‘no impact at all’ on their use of managed accounts,” Brennan said.