Efficiency and tax gains drive managed account adoption

With managed accounts continuing to gain a foothold among advisers, HUB24’s head of managed portfolios, Brett Mennie, has unpacked how the offering can be leveraged to streamline operations, enjoy tax benefits, and boost client outcomes. 

Appearing on a recent webcast by Dimensional Fund Advisors and HUB24, Mennie said that managed accounts were initially slow to make headway in the adviser community. 

However, they’ve now seen “massive growth and usage”, particularly in the last five years. 

Research from Investment Trends suggests over 75 per cent of advisers are using, or intending to use, managed accounts in the near future. 

According to Mennie, one of the key benefits of managed accounts, compared to traditional model portfolio strategies, remains the automation of investment processes and reduced risk and compliance obligations. 

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“When we look at a model portfolio, which is run and administered by the practice, typically it’s a point in time review of that portfolio, which either occurs once or twice depending on the review cycle with your clients,” he said, pointing out that managed accounts can be rebalanced continually, based on changes requested by the asset manager.

Similarly, rebalancing of model portfolios can often be slowed down by compliance demands and paperwork, which can result in varying outcomes for clients. 

“The implementation often with model portfolios – from having the investment committees, making a change, maybe taking some risk off the table or just rebalancing – requires the production of a Record of Advice, client consent, and then the administration to actually implement those changes,” Mennie said.

“This can delay things by a week, a month, six weeks, and clients are all getting a different type of outcome as a result because they’re not all processed necessarily on the same day.”

He said managed accounts are continuously monitored and adjusted, with HUB24 able to implement any changes before 11am.

“Then we go to market making those changes and sweep that across all client portfolios in the core SMAs,” he said.

This automated approach eliminates other time-consuming tasks associated with portfolio management, freeing up advisers to focus on higher-value activities such as strategic advice, tax management, and solidifying client relationships, Mennie said. 

“When we look at tax management under a model portfolio, it’s manually done, but under a platform running managed accounts, it’s automated through algorithms. Our system on the platform will search for the best cost basis when there’s a change to the portfolio. It takes into consideration 12 months capital gains tax relief and also gives you a guide as to, if you were to redeem some of the client’s money for example, the tax scenario that would occur to see whether it’s worth waiting to minimise the tax position,” Mennie said. 

Additionally, managed accounts are able to allow for substitutions, assisting advisers who might seek to implement greater income components in a client’s portfolio and can incur less tax implications with any switches, Mennie said.

“There’s multiple [advantages] but it’s really about creating an automated investment review process, it reduces the paperwork, compliance, the ROAs and client consent, and it’s efficient and fast,” he said.

Money Management previously delved into the efficiency gains of using managed accounts in practices in terms of hours saved, with Lonsec and Elixir Consulting’s Managed Accounts Research Report 2024 finding around 63 per cent of advice practices were able to claw back up to 10 hours each week. 

Meanwhile, 22 per cent estimated 10–15 hours and 6 per cent said up to 20 hours.

Advice firms that reported the highest efficiency gains had implemented managed accounts for over 70 per cent of their client base, the report said.

HUB24’s Mennie also said that, in automating many of the administrative tasks through managed accounts, advisers can significantly reduce their workload and increase their capacity to take on more clients. 

“What we’ve found is, with the time saving around this, it gives capacity back in the business which enables growth, where advisers that are currently taking on say 120 clients, they can move up to around 145 because there’s lesser administration occurring in the backend,” he said. 

Investment Trends research previously found more than one in two advisers are utilising managed accounts in client portfolios. Its usage has grown significantly in the last seven years, rising from 30 per cent in 2018 to 56 per cent in 2024.  

A further 22 per cent of advisers said they intend to use it in the next 12–18 months, Mennie said.

“The pleasing thing is, we’ve seen that intent convert to actual usage,” he said.