The domestic managed account market will evolve towards customisation in the same way that the market in the US has according to Blackrock head of model portfolio solutions, Josh Persky.
Speaking at Professional Planner‘s Best Practice Forum recently, Persky said the trend to customisation is highly likely to “break out” at both a product and service level if it follows the same pattern as that reported by the Blackrock team in North America.
On a product level, he explained, the development will lead to managed accounts being tailored much more acutely to the particular needs of the individual.
“We’re talking hyper personalization, very much moving from a one size fits all to a one size fits one,” Persky said.
“And that can include things like individual tax optimization, derivative overlays to manage FX risk, all above and beyond what can be traded within a managed account structure, even right through to personal values, things like environmental, social governance considerations. So all of that’s very much playing itself out in the United States.”
Even more important than product customisation, Persky continued, will be the tailoring of service offerings on managed account solutions.
“[There are] alerts around things like client reporting, specificity and customization of client collateral, how our clients being serviced in the way that they want to be serviced,” he said. “And that tends to run, almost ancillary to the product customization, if that makes sense.”
The trend towards customisation will be consumer driven, Persky said, even if investors aren’t necessarily taking advantage of the opportunity to craft their managed account solutions around their needs.
Clients are still largely buying into standard products in the US, he says, even if the market is giving them many more choices.
“As you can imagine, you can slice and dice these in lots of different ways; multi asset, single asset, different currency overlays, different factor rotation strategies, different amount of tracking error budget, different instruments, ETF mutual funds, single stock…” he said.
“But of course, of the 200 portfolios [offered by the Blackrock US team], interestingly, more than 80 per cent of the flow goes to your off the shelf standard multi asset class of ETF funding model portfolio.”