Trustees slow to adopt managed accounts

SMSF managed accounts

SMSF trustees have been slow to adopt managed accounts despite solid growth in their usage outside superannuation and among financial advisers.

SMSF investors have been slow to incorporate the use of managed accounts within their investment portfolios as their general uptake has continued to climb and now captures more than 10 per cent of all new inflows, according to research conducted for an investment manager.

The research, conducted by Investment Trends on behalf of managed account and exchange-traded fund (ETF) provider State Street Global Advisors, found financial advisers had increased their use of managed accounts and 12 per cent of new client inflows related to financial advice are invested via managed accounts, compared to 4 per cent only seven years ago.

The report also showed financial advisers considered managed accounts to be appropriate for a range of clients, with more than 60 per cent considering them useful for clients with investments between $250,000 and $1 million and 45 per cent considering them useful for high net worth clients with investment balances above $1 million.

State Street Global Advisors head of SPDR ETF Asia-Pacific distribution Meaghan Victor said the growth of managed account use by professional advisers demonstrated they were not just for the wealthy.

“The report shows a third of managed account users surveyed believe these structures are suitable for lower-balance clients, that is, under $100,000, and 30 per cent say they are appropriate for millennials,” Victor said.

Investment Trends chief executive Michael Blomfield said despite this SMSF investors were less likely to use managed accounts even though they were suitable for clients in accumulation phase and with lower balances with an SMSF.

“We are seeing the use of managed accounts in SMSFs, but the uptake is much slower because of the age profile that is present in this sector,” Blomfield said.

“The numerical majority of funds are set in terms of their investments, but more recently established SMSFs, and those with a lower age profile, are using managed accounts as a start-up investment vehicle.”

Victor said the use of managed accounts was also likely to be higher among those who receive professional financial advice and younger investors, and may also be taking place through other vehicles using a managed account structure.

“Thinking about the breakdown of SMSFs that receive advice and those that do not, I expect the growth will come through that segment who are advised. The use of managed accounts is not just for the wealthy and can be used for people starting an SMSF in accumulation and looking to grow their balances, as well as receiving advice,” she noted.

A managed account is a model portfolio in which a collection of assets is owned by the investor but managed by professional investment managers to target a particular balance of return and risk or portfolio objective.

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