Anyone who has bought a car – or more precisely, had to keep the family happy while also buying a car – knows that the requirements can be in conflict and are sometimes utterly unrelated to practical considerations.

Requirements such as size (big enough for the dog); colour (not another black car); engine size (zippier than the last one); fuel efficiency (economical) and extras (fitted GPS) all need to be addressed.

Managed accounts are like that. Making a decision about the most imaginative new idea to emerge in retail advice over the past decade can involve advisers or licensees trying to resolve seemingly incompatible goals.

Precisely because managed accounts impact so widely on all aspects of the way a dealer group or advisory practice operate, identifying the key decision criteria is critical. Hence this quick buyer’s guide, where we’ve set out a few simple questions as a starting point for the search.

Practice or licensee?

The first question is: Who are we making this decision for – adviser practice or licensee? The answer to this is going to determine so much that follows.

If the answer is that this is for the adviser, then we are going to be lead down a path of:
• office efficiency
• fit with the current platform and processes
• access to sector specific managers in which the adviser and their clients have confidence.

If the answer is that the licensee believes that managed accounts represent an important way for them to differentiate their offering and a path to a sustainable future, then the key choices are likely to be:
• strong administration partners
• revenue models that advisers and clients will accept
• strong strategic asset allocation capability as well as sector specific management
• considerations about the AFSL authorisations needed.

Because the key decisions aren’t the same for advisers and licensees, I have listed each in more detail in the table below, but split between the two.

 

Adviser’s key questions Licensee’s key questions
Basic structure
  • Do I want a “better fund” or a “better way of doing business”?
  • How does this reinforce my relationship with my clients?
  • Are we trying to create a service that differentiates our business or just fill a product gap in the APL?
  • Are we happy for advisers to choose any platform SMA offer with minimal input from us?
  • Do we want advisers using platform portfolio management tools or a more structured approach we manage ?
  • What level of operating and regulatory risk will we accept?
Administration
  • How will the managed accounts fit with my other client platform accounts?
  • Does my current platform offer a suitable service?
  • Can the service accommodate both a model portfolio and client specific assets?
  • Do we already have a preferred platform administration partner?
  • Do they have a service that will be widely adopted by our advisers?
  • Are we happy if advisers use whatever service their main platform offers?
Licenses
  • How does this fit with the authorisations I hold?
  • Can we operate this as our own service under our own MDA license ?
Investment
  • Do the managers I trust have SMA or other managed account offerings?
  • Is there a specialist managed account investment manager I want to use ?
  • Do we have model portfolios at present that can be the basis of a managed account service?
  • Is there a specialist managed account investment manager we can partner with?
  • Will our advisers support portfolios we offer in place of their DIY approach?
Revenue
  • Can I explain the pricing of service to my clients in a way they will accept?
  • Is the managed account program intended as a core ongoing revenue source?
  • Can our preferred administrator charge fees in the way we want?
Efficiency
  • Will the service really deliver the efficiencies in my practice?
  • What involvement will we have operating the service and are we equipped for this?
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