Key findings of the Investment Trends 2014 Platform Report

For the first time ever, the December 2014 Platform Report benchmarked the SMA capabilities of investment platforms used by Australia’s financial planners. The report covers 466 key characteristics of each platform and its service offering, providing a unique insight into the competitive standing of each provider and emerging trends across the industry.

2014 saw a significant expansion in the availability of SMAs to advisers via platforms

Three additional platforms introduced SMA capability in 2014 – Colonial First State FirstWrap, Macquarie Wrap, Perpetual Private Wrap  (and netwealth’s launch is imminent) – bringing the total number of mainstream platforms with SMA functionality to 11.

“The availability of SMAs to financial planners increased significantly in 2014, with 25% now using a platform with SMA capability as their most-used, up from 10% last year,” said Investment Trends Senior Analyst Recep Peker. “This may be the big catalyst the Australian SMA industry had been waiting for.”

Planners have been writing 3% to 4% of new client flows into SMAs since 2006, but the surge in adoption the managed accounts industry has been waiting for over the last decade has not materialised despite planners’ appetite. The Investment Trends 2014 SMA report, which surveyed 500 financial planners in March, found that while SMA usage had not grown (18% use them, same as 2011), interest in SMAs was the highest since 2011.

“Platform availability is one of the key prerequisites planners call for from SMAs, and the limited availability of SMAs via platforms prior to 2014 has definitely been a key hurdle for the industry,” said Peker. “The industry now has the chance to spur more substantive adoption of SMAs, provided the remaining barriers can also be overcome.”

Linear achieved the highest score for SMA functionality

Of the seven platforms whose SMA features were benchmarked, Linear achieved the highest score for SMA functionality overall, followed by HUB24.

Key SMA features of Linear include:

• – Professionally managed model portfolios and adviser directed model portfolios
• – SMAs can hold international direct shares, unlisted managed funds, term deposits and other fixed income, and other SMAs
• – Dynamic trading strategies can be applied to models to offer capital protection
• – Brokers can run models through their IRESS screen
• – Control over stocks in portfolios: Advisers can exclude, substitute and lock stocks
• – Aggregated trades that are netted off across all clients before being submitted to market

Among the newcomers (including netwealth’s upcoming functionality):

• – All three providers allow access to SMAs within super and pension accounts
• – CFS offers more flexibility with SMA managers able to hold unlisted managed funds and term deposits
• – Macquarie Wrap (which also powers Perpetual Private Wrap) has a suite of SMA reports including portfolio valuation, investment transactions, income details, unrealised gains/losses, realised gains/losses and cash transactions
• – netwealth’s strengths are transactional, offering trade aggregation and netting for an individual client’s rebalances, additional rules (for security substitution, exclusion etc.) and ability to hold SMAs within model portfolios