In efforts to bridge the advice gap by taking advantage of managed account efficiencies, Lonsec is acquiring managed discretionary account (MDA) provider Implemented Portfolios Limited.
IPL specialised in MDAs targeted to high net wealth individuals and affluent retail clients, and further expands the managed account offering of the qualitative investment research firm.
Lonsec chief executive Michael Wright told Professional Planner there’s a significant imbalance around advice which the research house believes MAs can help solve.
“The need for advice has never been higher – 2.6 million Australians are seeking advice [a figure] which has doubled since 2015. What’s always blows me away is that is today. If you look forward, there’s 5 million more Australians looking to retire and they all have unique advice needs.”
From the perspective of the researcher this is a commitment to supporting advisers, Wright says.
“One of the core enablers to help gain more clients with less is advisers is using and leveraging managed accounts. We’re playing a long game here – we’re betting advice will be much more successful over the next 30 years.”
Lonsec already has a separately managed account business with 3.6 billion in funds under management (FUM) and the IPL acquisition will boost Lonsec’s FUM to over $5 billion.
“We’ve seen over the last five years the uptake by advisers with that,” Wright says. “IPL plays with a part of the market we don’t service at the moment. This helps us get a full complementary suite of managed accounts to help create efficiencies around investment services for advisers.”
Lonsec wants to ensure stakeholders the acquisition will not distract from its core business activity of research and ratings through Lonsec Research and SuperRatings.
“There’s no canibalisation; there’s no crossover,” Wright says. “It’s all unique but it comes down to our core purpose: how do we help more Australians make better investment decisions and we’re laying the tracks.”
Booming industry
The Australian managed account market currently has FUM of $131.2 billion with a five-year compounding annualised growth rate of almost 30 per cent p.a. according to data from IMAP.
Research from Investment Trends and SSGA found 53 per cent of advisers are using managed accounts compared to 16 per cent a decade ago.
Earlier in the year at the Professional Planner Researcher Forum, Wright noted the risk of advisers posing as product manufacturers with the spread of bespoke model portfolios creating conflicts of interest.
ASIC already has started paying extra attention to possible areas of conflict within managed accounts and the research houses have warned against using them purely as a revenue stream.
Similarly, AMP Advice CEO Matt Lawler has suggested the industry be proactive in self-regulating the area before the government feels the need to step in.
