Managed accounts growth accelerates

Managed accounts advisers say they save 15.7 hours on average on a typical work week, up from 13 hours two years ago as proficiency in advice practices levels rise, according to research.

The latest SPDR ETFs/ Investment Trends Managed Accounts Report, which surveyed 660 Australian-based financial advisers between December 2021 and January 2022, also showed more than half of financial advisers (53%) were using managed accounts, up from just 16% a decade ago.

State Street Global Advisors head of SPDR ETFs Australia and model portfolios for Europe, the Middle East, Africa and Asia-Pacific, Kathleen Gallagher, told Money Management outsourcing was key to free up time and helped advice firms meet their mounting compliance burden.

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“If you look at it over a year, that’s 100 days they get extra to engage with their client base and strengthen their overall strategy. At the same time, it’s not just about client retention, it’s also about growing their business,” Gallagher said.

“Advisers are telling us they like to use managed accounts because they provide access to institutional-grade investment management, efficiencies of scale, and more scope to focus on educating their clients and meeting client goals.”

The report showed advisers who already used managed accounts were recommending them for 60% of their clients, up from 44% in 2021. Prior to COVID-19, advisers were recommending managed accounts to just one third of their clients. 

“As advisers are getting more comfortable with the structures [of managed accounts] they’re seeing the benefits,” Gallagher said.

Investment Trends chief executive, Sarah Brennan, said the breakdown of the type of client using managed accounts had changed over the last few years as advisers had become more familiar with the technology.

“In the past it tended to be traditionally around that affluent client group ($100,000 to $250,000) and that's still significant, but what we have seen for slightly lower balance clients, [is] the usage of managed accounts has increased, as well as the usage of managed accounts for self-managed super funds,” Brennan said.

“In this year’s study, we saw advisers using managed accounts for those clients less than $100,000, move from nearly 20% to 40% - so it nearly doubled.”

While the majority of managed account advisers still believed affluent clients were the most relevant target client group for whole-of-portfolio managed account solutions, a growing proportion appreciated their suitability for smaller portfolios.

For example, about 35% of advisers believed it was appropriate for their millennial clients to hold the majority of their portfolio in a managed accounts structure, up from 30% in 2021.

Meanwhile, 45% believed it was appropriate for pre-retirees aged over 50 to hold most of their portfolio in a managed accounts structure compared to 40% in 2021.

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