For advisers that have already started relying on website disclosure, the unclear legislation “may or may not” be an issue, the Cowell Clarke lawyer explained. Whatever approach advisers are currently taking, they should all be paying attention when the regulator releases its guide next month.
Real estate income will face challenges in the new value cycle, Invesco says, but investors will have the chance to build growth if they lean into secular drivers and key differentiators.
What is the real value of managed accounts in an advice practice?
The view on managed accounts seems to oscillate among advisers, and while most see their advent as a brilliant leap of technology that creates efficiencies for practices and untold benefits for clients, there are some that still harbour doubts about their role in the advice process.
What they are, to be clear, is a portfolio of assets that is professionally managed on an investment platform to a predetermined set of guidelines.
A distinction needs to be made between separately managed accounts (SMAs), which are registered managed investment schemes and classified as products that come with a PDS, and managed discretionary accounts (MDAs), which are technically provided as a service.
What they offer, and whether that benefit is worth the perceived trade-offs, is a decision every adviser must make for themselves, taking into account what it means for their practice and their clients.
Speaking on The Inside Network’s ‘Are managed accounts your solution to scalability?’ webinar, Perpetual Limited’s head of managed accounts Amanda Chow explained the basic mechanism of managed accounts and the prominent advantage.
“A managed account can be seen to be like a master portfolio that you link your clients to, and when an investment change is made via the chosen platform the trade automatically flows through to whichever clients are linked to that managed account, and the trades are actioned for clients all at the same time,” Chow said.
“This is all done without the need to issue a [Record of Advice], because you’ve already done that with your initial [Statement of Advice] to put them into the managed account,” she continued. “So you don’t have to wait for the client to return their authority to proceed, and do the follow up emails and so on and so forth. The reduction in paperwork provides a huge opportunity for scalability.”
There are several factors driving the growth of managed accounts, Chow noted, which have grown to just shy of $200 billion funds under management in Australia over 15 years. Aside from the benefits to clients and advice practices, managed accounts are being pushed along by both the advancement of the investment platforms that underpin them and a surge in the number of providers that are catering to the burgeoning new sector, including the asset consultants that manage the investments in managed account portfolios. “They’ve been very big enablers for this industry,” she said.
Moving ‘above the line’
Also speaking on the webinar was one of those enablers, analyst Mishan Dahia from investment consultancy Atchison. Dahia said managed accounts are “one lever of many” that advisers can use to increase scalability in their practice.
By outsourcing investment performance to a professional investment house, he explained, advisers can move the focus from product, which is “below the line”, to people, which is “above the line”.
“You’re leveraging an investment arm to allow scalability from an operational efficiency, removing the ROA and removing that extreme administrative burden to allow you to be a lot more tech savvy and efficient in the way you administer and push out your associated solutions,” Dahia said. “Then you’re talking to the client about their values, their goals, what they actually want, and you’re further strengthening that relationship.”
A good example of the inherent efficiency found with managed accounts, he said, can be seen in the recent Chinese market rally, which pushed up the Chinese market 23 per cent in five days. If an adviser wanted to quickly take advantage of that, he said, the opportunity would be lost by the time they put SOAs together for the entire client book. With managed accounts, however, risk can be dialed up or down at a moment’s notice. “These are some of the other benefits of utilising managed accounts,” he added.
There are perceived downsides, Dahia conceded, including the costs associated with both using more advanced managed account-enabled platforms and the managing asset allocation.
“We also hear a lot about losing control, the idea that advisers aren’t adding as much value anymore, or they’re losing their identity through this process,” he said.
“But the reality is… if you’re basing your value proposition on investments, then arguably you’re not positioning yourself in the most effective way because markets can go up or down… and that can reflect poorly on your business. It’s about trying to move that proposition [from] below the lines to above the line.”
