Managed account usage spikes

managed accounts usage

Global pandemics, political tensions and market volatility have driven the usage of managed accounts to record high levels.

The use of managed accounts has increased sharply in the past year among financial advisers, with more than half using them in client portfolios and a third seeing them as suitable for SMSFs, according to a new report from State Street Global Advisors and Investment Trends.

The latest “SPDR ETFs/Investment Trends Managed Accounts Report” found 53 per cent of financial advisers are using managed accounts, up from 44 per cent in 2021, 40 per cent in 2020 and 16 per cent in 2012.

At the same time, advisers currently using managed accounts are now recommending them for 60 per cent of clients, an increase from 44 per cent in 2021, 43 per cent in 2020 and only 33 per cent in 2019.

State Street Global Advisors head of SPDR ETFs in Australia and model portfolios for Asia-Pacific, Europe, the Middle East and Africa Kathleen Gallagher said the impact of COVID-19 had amplified the benefits of managed accounts for financial advisers and their clients.

“Volatility due to COVID-19 has played a role in highlighting what managed accounts can do for investors, but recent tensions between China and the US, inflation concerns and labour shortage issues have also been drivers,” Gallagher told selfmanagedsuper.

“There has also been a demand on advisers from their clients to ensure investment managers are taking care and for advisers to hand over the compliance and day-to-day management of client portfolios.”

She said this shift was likely to remain after some of the present drivers of interest in managed accounts have moved and this was evident in the widening demographic of investors using them.

“These numbers are sticky because once advisers and their clients use a managed account, they tend to stay with them. This research, over the past 13 years, has shown this and is also evident in the demographics seen in this year’s report,” she said.

Investment Trends chief executive Sarah Brennan said the research on the demographics showed advisers believed managed accounts were useful for all client types and that view had increased in the past 12 months.

“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 $100k) and high net worth clients with more than $1 million in investable assets,” Brennan said.

“What’s more, a third of managed account users say these structures are appropriate for millennials and SMSFs.

“When it comes to implementing responsible investing solutions, the vast majority, or 76 per cent, of advisers prefer to do so within a managed accounts structure, suggesting they trust that ESG (environmental, social and governance) themes are best managed by professional investment managers.”

According to the Institute of Managed Account Professionals and Milliman, managed accounts totalled $131.6 billion in funds under management as of 31 December 2021.

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