Although managed accounts have been around since the late 1990’s they have only recently been making headline news. A recent Association of Real Return Investment Advisers (ARRIA) roundtable saw a panel of practitioners talk about the challenges of implementing goals-based advice and how managed accounts are assisting in this space. Supporting the ARRIA roundtable panel discussion were a number of the new managed account entrants including Mason Stevens, Managed Accounts and OneVue.
Why is it now that managed accounts are being heralded as the new disruptors?
Whilst the panel members agreed that it has taken some time for practitioners to take up managed accounts, many see them as more an evolution rather than as a new disruptive force. Though in all instances all the panel members agreed that not all managed accounts are created equally, and the key to successfully integrating them into an advice business is to first understand the key value proposition of the advice practice. Only then can a practitioner successfully select and work with the correct managed account provider.
Key trigger points were discussed that have assisted in driving the growth in managed accounts and these include the regulatory and compliance changes, the overall trend by consumers demanding greater control over their own destiny, and the overall technology innovation.
What is so appealing about managed accounts?
The overwhelming response from panel members was that transparency and the beneficial ownership provided are a key catalyst for utilising managed accounts. For many this transparency also enabled them to build more bespoke “goals-based portfolios” for their clients, previously not cost or time effective when utilising only managed funds.
An interesting theme through the panel discussion was the overall customer demand for greater transparency and also greater control, all of which is better serviced via a managed accounts platform. This re-enforces the argument that managed accounts have assisted practitioners in re-aligning their business models to be more focused around the customer than the product manufacturer. This is further supported by the fact, that on average, managed account gross fees are typically lower than traditional base management fees on managed funds (ranging from between 5 to 30 basis points lower).
Managed accounts are also attractive to advisers as they enable advice practices to tailor the solution to best fit their advice value proposition. This means they are not forced down a “one size fits all” solution, whilst still enabling independent practitioners to benefit from cost efficiencies that previously were only available with scale.
As with all “evolutions”, the managed account space was seen as a place by which non-traditional advice-based business such as stockbrokers could make the transition across to becoming wealth advisers. As such, part of the growth in the managed account space was also coming through via the shift of “off platform” assets migrating to the managed account space as new entrants emerged.
What was clear for all panellists was how managed accounts had enabled the value chain to shift, giving advisers and licensees greater ownership and control over portfolio management, asset selection and portfolio construction.
With the world of distribution and investment products and strategies constantly evolving with the likes of new mechanisms, it is likely that the managed account space will continue to change and develop. However, it is clear that the overall trend is towards enabling the practitioner to build more client-centric advice businesses: a trend that overall can only be seen as a positive for the whole advice industry.
Rebecca Jacques is the general manager of ARRIA – the peak industry network for all professional real return investment advisers and relevant stakeholders who are committed to ‘goals-based’ advice – that is, advice that aims to provide investors with more certainty in their investment outcomes. ARRIA is a not-for-profit association set up as an adviser-led association, “for advisers – by advisers”.
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