Planners’ role in SMA market to grow

Planners would benefit from greater education about separately managed accounts (SMAs), according to the head of a leading financial services company boosting its involvement in the SMA market.

First Capital Group (First Capital) managing director Les Freeman, who describes SMAs as “the future of wealth management”, believes greater instruction for planners will help them play a greater role in what is soon to be an “enormous” market.

Freeman’s comments follow First Capital’s announcement that it had acquired SMA provider Explorer Group (Explorer).

According to Freeman, growth in the SMA market is being propelled by growing awareness of the advantages of SMAs over competing investment products.

“People are now looking for products where they have greater ability to manage their own investments,” he said.

“SMAs give more flexibility, are more transparent, and are known to be more tax effective.”

According to Freeman, many investors are moving from wrap products and share funds to SMAs, which are “more actively managed”.

SMA investors tend to be larger investors, he said, with minimum investments of around $20,000 to $25,000.

As a result, the company hopes to promote Explorer’s investment products to up to 150,000 high-net-worth individuals and institutions in 13 countries.

Freeman said the acquisition of Explorer further complements First Capital’s movement into the self-managed super funds market, where he believes SMAs play an active role.

Explorer currently has $220 million in funds under management through its direct subsidiary Direct Portfolio Services Limited.