Managed accounts become preferred choice

By Penny Pryor

Managed accounts have become hugely popular with financial advisers over the last decade, with more than half now using them with clients, according to the latest SPDR ETFs / Investment Trends Managed Accounts Report.

The State Street Global Advisors and Investment Trends report surveyed over 650 Australian financial planners via a quantitative online survey conducted between December 2021 and January 2022. Their report found that 53 per cent of advisers now use managed accounts, compared to 16 per cent a decade ago.

Of the advisers that do use managed accounts, they are recommending them for 60 per cent of their clients, compared to 44 per cent in 2021 and 32 per cent in 2016. And 52 per cent of users of managed account direct more than 80 per cent of a typical client portfolio into these solutions.

Separately managed accounts (SMA) on platforms are the preferred option of advisers, with 80 per cent of advisers saying they use this structure and 16 per cent saying they use managed discretionary accounts (MDA).

Investment Trends chief executive officer, Sarah Brennan, attributed the rise in managed account usage to advisers recognising their benefits for a broader investor demographic.

"Part of the growth in managed accounts comes down to their growing suitability as a whole-of-portfolio solution for lower balanced clients (less than $100,000) and high net worth clients with more than $1 million in investable assets," Brennan said.

A majority of advisers (61 per cent) also say that managed accounts already provide an effective mechanism for them to align client portfolios with ESG objectives, with 76 per cent saying it would be their preferred way to do this.

Managed accounts also offer advisers considerable, and increasing, time savings. Advisers using managed accounts say they save 15.7 hours on average in a typical work week, up from 13 hours in 2020. The majority of this time saving is in investment administration work and selecting or researching investments for client portfolios.

'Highest efficiency advisers,' or those identified as the top 20 per cent based on key business metrics, say that clients' ability to see underlying shares in their portfolios is the biggest benefit of recommending managed accounts. Other benefits included a reduction in business operational risk and as an effective way to access professional funds management.

There is now $131.6 billion in funds under management in managed accounts in Australia, with 20 per cent of client funds invested into managed accounts.