Research and human judgement key to effective managed account usage

While model figures provide valuable insights on how advisers can draw benefits from managed accounts, Zenith Investment Partners has argued professional judgement and quality research are key to successful implementation.

According to the Institute of Managed Account Professionals’ (IMAP) biannual FUM census, produced in conjunction with Milliman, managed accounts saw inflows of $16.7 billion in the six months to 30 June, marking a 24.6 per cent uptick on the same period a year prior.

This growth was largely attributed to increased use of managed accounts by financial advisers, particularly as efficiency becomes a top priority for the profession.

When it comes to using managed accounts, however, Zenith's head of portfolio solutions Andrew Yap explained human insight is key to ensuring they are utilised effectively, rather than simply relying on model outputs.

“Models give you the numbers, but they can’t always tell you how markets will behave. Human judgement and insights are what turns data into resilient portfolios that can withstand unexpected shocks, which is especially important in today’s environment.  

“Will it be a smooth ride? Will we hit a recession? Or is a sudden boom around the corner? This is where the experience and expertise of investment professionals make all the difference and can be what turns a good plan on paper into a resilient portfolio that can weather real-world storms."

Relying on the firm’s internal expertise, Yap said Zenith utilises insights from both its investment research team and asset allocation experts to understand what is occurring at the coalface to inform its portfolio decisions.

“A managed account provider with access to contemporary insights can produce a more robust long-term outcome. They will consider current market intelligence including emerging trends, sector specific themes and the team’s high conviction views, which helps keep the chosen portfolios ahead of the curve.“

Notably, managed accounts have also been raised as a possible vehicle to expand accessibility to private markets.

On an AMP webinar last month, David Hutchison, AMP general manager of managed portfolios and investments, explained that accessing private markets through managed accounts could provide strong governance frameworks around an inherently complex asset class.

With private markets becoming more mainstream, Yap argued that the human touch is critical as advisers play a key role in explaining what the model numbers actually mean for clients and their portfolios.

Yap added: "The data is powerful, but it has to be paired with a transparent conversation about the risks, the long-term commitment, and the importance of choosing the right manager. The future will be about weaving them together and giving us the confidence to stay calm when markets are shaky and the situation changes."