How managed accounts help you create value for clients

Simon Hoyle


July 26, 2017

The greatest benefit of a managed account solution is that is should allow advice businesses to focus on what clients perceive as most valuable, the inaugural Institute of Managed Account Professionals (IMAP) Portfolio Management Conference has heard.

The head of client strategy at Macquarie, Sherise Mercer, told the IMAP conference in Sydney on Monday that managed accounts address many of the pain points advice businesses commonly face, and the benefits of effectively implementing a managed account service can be significant.

But the benefits the advice business itself achieves are not necessarily things clients value, Mercer said. For example, managed accounts might dramatically reduce the time, number of staff and funds spent on managing clients’ portfolios, but fees are not a driver of satisfaction, so lowering the cost of investment, in isolation, isn’t necessarily going to enhance an adviser’s value proposition. Macquarie’s research also shows that clients do not rank the investment expertise of their adviser among even the 20 most important aspects of the relationship.

When clients are asked what they do value most in a relationship with an adviser, Mercer said, only one of the top five relates to value in terms of cost. The other four relate to personalisation of advice and services.

The research shows that each year different things bubble to the surface as the most-valued aspects of the adviser-client relationship. In its latest research, the five most valued aspects among clients were:

  1. My adviser manages my portfolio for risk-return outcomes that are important to me
  2. I receive the right level of information about my progress
  3. My adviser connects me to others as needed
  4. My adviser proactively manages my affairs
  5. My adviser helps improve my financial knowledge.

Mercer said the six biggest issues facing all advice businesses are: drowning in administration, email, paperwork and compliance; dealing with increased regulation; achieving scalability of current processes; managing risks; absorbing costs, and margin pressures; and managing growth.

She said a lesson is that if implementing a managed fund solution frees up resources and reduces costs for a business then, irrespective of the benefit for the business, those resources must be directed to delivering things the client values.

Mercer said the idea that an adviser connects a client to other service providers as needed is a new entry in the top five this year.

“What we’re putting this down to is that the client doesn’t have the sensitivity to understand what an adviser does, versus what an accountant does versus what an SMSF administrator does, versus what an investment manager does,” she said.

“They see it as, ‘I need someone to help me manage my money.’ When they go to an advice practice and they place their trust in adviser, they’re actually placing trust in the adviser to understand their needs, all of their needs, and to help manage those needs whether [that’s done] by the adviser themselves, in-house, or [the adviser] recommends them to someone else.”

Mercer said delivering bespoke, personalised service is where the true value of advice lies and advice businesses shouldn’t make the mistake of believing a managed account service means every single portfolio must be customised for every single client.

“The portfolio is the ‘how’, so it doesn’t need to be customised,” Mercer said. “I’m talking in broad brushstrokes. There will be clients who want that, and customisation is important to them. But broadly… operating a much more efficient, modern, systematic model through managed accounts enables the practice to focus more on the personalisation aspect of the experience.”

If one the key reasons for an advice business to use managed accounts is to make sure the advice value proposition remains attractive, it makes sense to focus on the things clients perceive as valuable.

“If I’m already struggling against the environment of technology, robo-advice and clients being educated through Google, then how can I make sure my clients make sure this shift is valuable to them, and [contributes to] the value I am still bringing to the relationship?” she asked.

Implementing managed accounts might, therefore, require advisers to give up the mantle of “investment expert”.

“When you have an adviser who, for the past 20 years, has been getting up in the morning, looking in the mirror and saying, ‘My role is to be the absolute expert at investments for my clients’, in an extreme example, we’re asking them now to say ‘I manage the investment experts, and I’m the expert in the client’s needs and gathering a team of people together to meet them,’ ” she said.

“That’s quite a shift.”

TOPICS:   customer service,  Institute of Managed Account Professionals,  Institute of Managed Account Professionals Portfolio Management Conference,  macquarie,  managed accounts,  Sherise Mercer

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