IMAs/SMAs fail to make impression on advisers

Despite industry hype surrounding individually managed accounts (IMA) and separately managed accounts (SMA), the majority of financial planners have not and do not intend to use them, according to the latest Wealth Insights report.

The survey of 270 planners found that 85 per cent have not used these types of managed accounts in the past 12 months, and of that group, 90 per cent believe they won’t use them in the next six months.

Wealth Insights managing director Vanessa McMahon said many planners did not perceive any real benefit from using IMAs/SMAs, particularly when compared to the platforms they currently used.

“Believe the industry hype and the IMA/SMA phenomenon is poised ready to tear down the dominance of traditional managed funds and the platforms that support their expansion,” she said.

“Despite the promise of IMAs/SMAs, the reality is that they have failed to make much of an impression on financial planners.”

Bravura Solutions provides the underlying software to IMA/SMA providers and agrees that the products haven’t taken off as greatly as the hype suggests.

“There certainly are some benefits of IMAs/SMAs, but we think part of the reason for why they haven’t taken off is twofold; they’re generally being targeted at high-net-worth individuals, and they’re not available at the moment in superannuation, and super is a large part of an adviser’s world,” Bravura head of corporate strategy Wes Hall said.

Ray Griffin, managing director of boutique financial planning practice Griffin Financial Services, said as a planner he preferred direct, hands-on involvement in his clients’ portfolios — the type of access IMAs/SMAs don’t offer.

“In our own business, we individually manage every client’s portfolio, so we are not looking for packaged, off-the-shelf type services from institutions,” he said.

“An adviser’s job, apart from a lot of other things, is to manage a portfolio — when my clients come to see me they want to know how their investments are going, and it’s my job to be across the portfolio with an understanding of what’s been happening and why and be able to give them an outlook.

“Now if I’m not managing that portfolio, I’m really just giving them a token gesture in terms of the insight I can give them.”

MLC MasterKey Custom was met with the same attitude when it consulted with its adviser base about its plans to launch an IMA/SMA.

Its response to this was to design what it coined an ‘adviser managed account’, which affords advisers many of the benefits of IMAs/SMAs but with greater control over the portfolio.

“We were looking at the IMAs and SMAs in the market and considering whether we should be thinking about something like that, and in the end, for a number of reasons, we thought there was a better solution that had broader appeal,” MasterKey Custom head of product David Wappett said.

The full Wealth Insights report is currently available from the researcher.