The use of managed accounts by financial planners across Australia is not just here to stay, it is set to rise.
This year, State Street Global Advisors partnered with Investment Trends on a comprehensive study of the Australian managed accounts sector, drawing on responses from 760 planners who shared insights into their current and future use of managed accounts.
The survey highlighted the undeniable rise of these solutions among planners. More specifically, 35 per cent of planners said they currently use managed accounts and will continue to do so, up from 30 per cent a year ago. A further 31 per cent said they may use them in the future.
Responses from the study show the uptake of managed accounts has doubled over the past five years, while new inflows into these solutions have tripled on average. But according to the survey, planners aren’t just recommending managed accounts more, they’re also embedding managed accounts into their practice operating model. Current users expect to see managed accounts account for over half their funds under management in three years’ time, up from less than one-third today.
So what is behind this rise in use among planners and what does the “State Street Global Advisors SPDR ETFs/ Investment Trends 2019 Managed Accounts Report” tell us about whether this rise and adoption of this investment solution is set to continue?
Unpacking the rise of managed accounts
To put it simply, growth has gone hand in hand with planners and clients being better informed. The more planners and their clients are becoming aware of their broad benefits and advantages, the more they are using these efficient investment vehicles.
Planners who participated in the study told us managed accounts reduce their firm’s compliance burden and provide a range of benefits to their clients, such as access to professional fund managers at a competitive cost. Many planners see these vehicles as a key way to enhance their client value proposition and meet their clients’ desired investment objectives.
From the end client’s perspective, the study shows planners believe their clients value managed accounts most often for their transparency, diversification, direct ownership of underlying assets and, importantly, access to institutional-quality investment managers.
The role of education
Although awareness has been a key driver of the rise in the use of managed accounts, lack of education presents challenges for planner adoption. Both current users and potential adopters of these solutions said a lack of knowledge was standing in the way for both planners and their clients.
Eighty-two per cent of potential users rate their expertise of this type of investment as either basic or non-existent. For current users, more than one-quarter said their knowledge was basic, and half said it was moderate.
The message from this research is clear. Both current and potential users want more education on the opportunities and challenges of embracing managed accounts. This could mean anything from understanding the client benefits, costs and tax advantages, to unpacking how these vehicles actually work and how they can be implemented into one’s practice.
Planners have a clear opportunity to better educate themselves about the pros and cons of managed accounts. Not only will this help them better advise their clients on the right investment solutions, but also help unlock all benefits these solutions offer.
Managed accounts provide clear benefits to both planners and their clients, and our study shows the signs exist that this sector is set to grow further in Australia. Education remains a hurdle for greater adoption, but planners can equip themselves with the knowledge to use managed accounts to deliver better outcomes for their clients.
Meaghan Victor is head of SPDR ETFs for Australia and Singapore at State Street Global Advisors.