Research into managed accounts shows advisers are continuing to make efficiency gains but experts aren’t sure when the maximum time saving will “cap out”.
The 16th annual managed accounts report produced by State Street Global Advisors together with Investment Trends, found that advisers who use managed accounts in their practice save on average 23.9 hours per week – the equivalent of almost three business days.
This is up from 22.8 hours per week in 2024 and 15 hours per week in 2022 (the equivalent of two business days) – showcasing the time-saving efficiencies of managed accounts. The report said 60 per cent of advisers cited “freeing up their time” as one of the main advantages of managed account adoption.
Managed accounts have increased significantly in popularity with advice firms, with nearly three out of five advisers incorporating them into client portfolios due to the time saving benefits, research has found.
But the research comes as ASIC revealed that managed discretionary accounts, a subsector of managed accounts which are classed as an advice product and service, “remains an area of interest” to the regulator over potential conflicts of interest.
State Street Global Advisors vice president and ETF model portfolio strategist Sinead Schaffer tells Professional Planner advisers who use managed accounts for several years in comparison to one year are experiencing more time saving benefits.
“Once it’s being used year on year, you’re then going to benefit even further from those time savings,” Schaffer says.
“That’s why we’re actually seeing that growth right now in the time savings being quoted.”
She says she was not sure at what point the maximum time saving would “cap out” as the proportion of advisers using managed accounts is currently 59 per cent, with another 16 per cent considering incorporating it and a potential percentage of 75 per cent “within the next twelve months”.
“My expectation is that we would see that time saving continue to grow as they’re being used more and also being used for longer periods of time,” Schaffer says.
Investment Trends chief executive Eric Blewitt says the time saving element of managed accounts is allowing advisers to reinvest the time saved back into the business.
Blewitt says there are three key areas regarding the reinvesting of time saved by utilising managed accounts.
“One, they’re looking to grow their client bases. Second is actually enhancing and deepening the client relationship,” Blewitt says.
“And thirdly, and I think most importantly, it’s just focusing on the advice goals.”
The research also shows advisers using managed accounts on average allocate 71 per cent of clients’ total assets into the accounts. Furthermore, these advisers are directing 48 per cent of new client inflows to managed accounts, up from 41 per cent in 2024.
This is a key reason why managed account funds under management (FUM) increased dramatically in 2024 to $232.77 billion and a reflection of managed accounts becoming a mainstream product for investors.
“What’s happening in the industry is that products are no longer just niche, they are now the mainstream,” Schaffer says.
“Take yourself back to 2016. You had 30 per cent of advisers considering using it today. That’s sitting close to 60 per cent [today].”
She says five years ago managed accounts were considered a “product of the future” and now they’re being used in the mainstream.
Blewitt agrees with this viewpoint and says over a five-year period there has been an annual growth of 24 per cent.
“The managed account market amongst advisers is very much alive and kicking and very much becoming a mainstream product, and a mainstream structure to go to,” Blewitt says.
The catalysts
Blewitt says the main catalysts leading advisers to adopt managed accounts as part of their practice are “cheaper fees and better performance”.
The research found performance to be the most important factor in choosing a managed account, specifically the ability to achieve full asset allocation, with the second most important factor being fees.
Blewitt also notes licensee encouragement as a reason why current advisers using managed accounts adopted them initially – around 20 per cent.
“From the larger licensees from a risk perspective, they’re able to see what the overall asset allocation is and where it’s actually sitting, because they’ve got transparency within the managed account,” Blewitt says.
Benefits for investors and advisers
Schaffer says in comparison to five years ago, investors are getting more comprehensive and personalised services from their financial advisers.
“Investors want more. They’re not just wanting portfolio management, they’re wanting a whole kind of wealth management.”
She notes managed accounts are helping advisers to “tailor their advice process in a way that that their clients want to receive”.
Schaffer mentions the value proposition of advisers incorporating managed accounts for their clients has changed to offer more personalised services.
“37 per cent of advisers noted the shift to the value proposition was to engage with their clients about client lifestyle style goals.”
Additionally, managed accounts have the benefit of providing greater transparency for advisers and clients. Advisers are still required to check in with their investors annually to check in that the managed accounts are still appropriate for the client’s needs.
The time saving element of managed accounts allows for greater transparency and communication with clients.
“If anything, they’re more transparent than maybe previous solutions that they may have been in. And so that’s been a key benefit reported by advisers,” Schaffer says.
Client feedback
Feedback from investors has been positive regarding the implementation of managed accounts. Multi-asset class models are the most widely used with 68 per cent of advisers recommending the models in 2024.
A 2024 State Street report on model portfolios and investor feedback found more investors are aware of the option of model portfolios now (67 per cent) than five years ago in 2019 (47 per cent).
85 per cent of investors reported that they felt involved in the investment management process, showing a clear transparency.
Furthermore, the research found among investors who know their adviser uses asset models, many more have assets in models (84 per cent) than in 2019 (56 per cent).
Schaffer says the report’s findings show if advisers can “educate their clients, let them know that they’re using model portfolio, understand the benefits, they’re going to have a more satisfied investor at the end of the day”.
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