Financial advisers are increasingly turning to managed accounts and shifting away from direct shares, with the use of managed accounts increasing for the fifth consecutive year according to research released today by NAB and Investment Trends.

The 2017 NAB/Investment Trends Planner Direct Equities and Managed Accounts Report shows that the proportion of advisers using managed accounts increased from 16 per cent in 2012 to 26 per cent in 2017, with a further 20 per cent intending to begin recommending them in the next 12 months.

This data corresponds with a decline in the use of direct shares by advisers, which fell for the third year in a row, from 56 per cent in 2015 to 50 per cent in 2017.

Client appetite for managed accounts drives growth

A preference for professional funds management and increased transparency are the top two factors driving the popularity of managed accounts among clients. Investors also report having access to tailored investment options, less administration and lower brokerage fees as reasons they opt for managed accounts.

“What we hear from advisers is that clients want traditional investment specialists, and they like being in the driver’s seat, which is why the control and visibility managed accounts offer is so valuable to them,” Investment Trends CEO, Michael Blomfield, said.

Investment Trends also expects the tax efficiency of managed accounts to drive further growth.

“Managed accounts can offer significant tax benefits over pooled structures, so we expect that in the next few years this will lead more clients to opt for them,” said Mr Blomfield.

Advisers see benefit of increased efficiency

The research also indicates that advisers are benefitting from the popularity of managed accounts, with users reporting greater inflows and profitability. The average Funds Under Management for advisers recommending managed accounts was $55 million, compared with $42 million for non-users. A further 63 per cent of advisers using managed accounts reported improved year on year profitability, compared with 56 per cent of non-users.

This could be a result of improved efficiency and reduced administrative/compliance burdens, which enables advisers to service more clients (an average of 131 for those using managed accounts; 106 for those who do not).

Managed accounts suitable for more clients

Another clear trend in the report is the emerging view that managed accounts are suitable for a broader range of clients.

“One of the most interesting developments in the research is that managed accounts are being used with a broader range of clients, both high net worth and those on lower balances,” NAB General Manager of Strategic Accounts, Susi Collas, said.

“Over 40 per cent of advisers now say that managed accounts are appropriate for lower balance clients, which means that more investors are able to take advantage of them.”

Other key findings:

  • 33 per cent of managed accounts users see it as a whole-of-portfolio solution, up from 25 per cent in 2016.
  • Among advisers who recommend managed accounts, 62 per cent say their clients have become more engaged as a result of using these solutions.
  • The Independent Financial Adviser (IFA) market is leading the trend towards managed accounts. 53 per cent of IFAs use managed accounts compared with 47 per cent of aligned.

NAB backs managed accounts

The release of the research supports NAB’s continued focus on managed accounts.

“NAB has been an industry leader in Separately Managed Accounts for over eight years now, promoting and offering award-winning investments to both clients as well as advisers.

“This latest research further supports our long-term view on the suitability of managed accounts for a broad range of clients and speaks to the benefits they also offer advisers,” Ms Collas said.


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