Dealer groups who have seen a decline in revenue after the Future of Financial Advice (FoFA) reforms are increasingly turning to separately managed accounts (SMA) as a new business line.
The trend for dealer groups to create their own SMA propositions is in part being driven by client demand to which fund managers and platform providers have also responded.
At an Investment Management Consultants Association (IMCA) seminar in Sydney this week, Michael Ellsworth, general manager, Lonsec told of how his research house was trying to make sense of a sector where most dealer groups are not seeking a public rating for their SMAs and where there is no consistency of reporting.
“It is a bit of a dog’s breakfast at the moment,” Ellsworth said. “There is no ideal standard and more work to be done here.”
The most popular portfolios are concentrated Australian stock selections. There are only a few fixed income portfolios and one multi-asset portfolio said Ellsworth, but he predicted more multi-asset portfolios to come, particularly due to the way in which ETFs now covered most asset types.
While some dealer groups are managing their own SMAs, others are working with fund managers and Ellsworth identified the following fund managers active in the space: Antares, Ballieu Hoist, Dalton Nicol Reid, Goldman Sachs Asset Management, JB Were, MPPM, Perpetual, Quest, Ralton and Redpoint. He also listed the five platform providers as offering SMAs: AMP, BT, Macquarie, Powerwrap and Praemium.
He attributed improvements in technology to the growth in the market, which have helped with the administration and reporting for an SMA.
One of the ways Lonsec judges the worth of SMAs is by looking at their investment committees. Lonsec seeks evidence of independent committee members and remuneration structures as a sign of a well governed fund. He felt there was more work to be done in this area. Many SMAs, he said, “would not get through the research process.”
Ellsworth said the growth in SMAs in Australia trailed the growth of what was a more developed market in the US.
