Advisers are not following through on maximising client funds in managed accounts, despite popularity with its initial uptake.
Angela Ashton, Evergreen Consultants founder and director, said there seemed to be a barrier stopping advisers.
“Across all platforms, they’re building managed accounts and they’re setting them up and then advisers are not using them anywhere near as much as they promised or thought they might,” Ashton said.
“There’s definitely another barrier in there… there’s a barrier for them to put people in and it’s trying to work out what that barrier is because it seems to be a little complex.”
Ashton’s findings come as research from Investment Trends and State Street Global Advisors (SSGA) found that 70% of planners in Australia were using or had planned to use managed accounts, but the issue was around figuring out what was stopping advisers committing their clients to the model.
“It could be a heap of things, maybe the statement of advice (SoA) is too hard to sell to the client, it might be the cost is a little higher and they can’t get their head around how that works in best interests,” Ashton said.
“It could be losing control – there could be something in the advisers mind that if they put [clients] into managed accounts, they’ve lost control, but that would depend on the relationship with the consultant.”
Ashton said it could also be that the process was too administratively painful.
“To set up a managed account, they have to go through this whole rigmarole of choosing probably only one platform, maybe two, and then choosing a consultant,” Ashton said.
“Depending on who the consultant is they’ll charge some sort of retainer, up to $5,000 a month, while not doing anything but they’re getting that money.
“You go through this whole rigmarole and it might take them six months to work all that stuff out, you don’t have to sign any contracts but they’re making promises to the platform that they’re going to write X amount of money.”
After all this due diligence with the consultant was done, Ashton said, the models were put up on the platform.
“Then the next step is to talk to clients, write the SoA and get them into the model and then from there the money can be managed between the consultant and the adviser,” Ashton said.
“But it’s stopping at the product being built. The reality is a platform loses money if there’s not something between $25 million to $50 million on there, and there would be a lot of models out there that are sub that.”
