Just over half of managed account users say they compare fees to ensure managed accounts recommended to clients meet best interest requirements, according to research from Investment Trends.
The research, done in conjunction with State Street Global Advisors for the 14th year, found 45 per cent of advisers use research ratings and 43 per cent evaluate performance.
Investment Trends advisory board chair Sarah Brennan said performance and fees are becoming less important factors as time goes on.
“Factors such as availability on investment platform, then the reputation of the asset manager, are becoming more prevalent,” Brennan said.
Managed account uptake once again saw a slight boost from last year’s research which found 53 per cent of advisers were using the investment vehicle. This year’s research noted another 22 per cent are “potential users”.
Latest census results from IMAP and Milliman, released last week, found funds under management in managed accounts continued to surge, despite growth slowing in the current market environment.
While the year-on-year increase isn’t massive, we reflect back to a decade ago when usage sat at 17 per cent.
Separately Managed Accounts on platforms remain the most widely used structure to implement managed accounts, with 86 per cent of those utilising managed accounts via this vehicle.
Some 60 per cent of managed account users implement responsible investing or ESG within managed accounts and a quarter have a dedicated portfolio consisting solely of investments with high ESG ratings.
In focus
Advisers noted managed accounts allow them to better focus on client goals (cited by 45 per cent) and 39 per cent specified their value proposition changed to outsource portfolio construction to professionals.
State Street Global Advisors vice president Sinead Schaffer said the strong adoption of managed accounts reflected in their ability to support advisers’ holistic approach to financial planning.
“Advisers using managed accounts direct 41 per cent of new client flows into them, a fourfold increase from 10 per cent a decade ago,” Schaffer.
“In addition, managed account users allocate, on average, 76 per cent of their clients’ total investable assets into managed accounts. The research also shows that multi-asset class models are the most commonly used managed account, comprising almost three-quarters of recommended models.
Schaffer said advisers indicated that ETFs, direct shares, and managed funds were the most popular products in managed account portfolios over the past year.
The research found specifically 63 per cent of advisers used ETFs in the underlying products and IMAP’s census last week noted that managed accounts now accounted for 18 per cent of the ETF market.
Extra time
“Further, a third of potential managed account users would like to see more ETFs as the underlying products within managed accounts,” Schaffer said.
Some 63 per cent of advisers said “freeing up their time” was one of the main upsides with advisers, or their support staff saving, 17.1 hours on average per week, an hour and a half boost compared to last year’s result.
Brennan said advisers cited time savings, reduced compliance risk, and the ability to achieve full asset allocation as key reasons to use managed accounts.
“One of the key managed accounts segments is clients with investible assets of between $250,000 and $1 million,” Brennan said.
“Two in five current managed account users indicated that clients aged 35-49 are appropriate to hold the majority (e.g. over 75 per cent) of their portfolio in managed accounts and over a quarter indicated managed accounts are appropriate to hold the majority (e.g. over 75 per cent) of the portfolio for SMSF clients.”
The flexibility of managed accounts had meant advisers retained confidence in the use of those products.
“The report found that 41 per cent of financial advisers believe the current economic conditions and geopolitical events have had ‘no impact at all’ on their use of managed accounts,” Brennan said.
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