IMAs now more adviser friendly
Recommendation of individually managed accounts (IMAs) by advisers should swell now that the planning industry has thrown off commission trails, the head of an asset management company has argued.
Clime Asset Management managing director Roger Montgomery believes recent moves to a fee-for-service model have removed key barriers stunting wider adoption of IMAs.
“Three things have contributed to advisers not recommending IMAs in previous years — commission trails, platforms, and approved lists,” he said.
But with fee-for-service encouraging greater independence and customer-focus, advisers could now spruik the benefits of IMAs, he said.
However, Fiducian Financial Service’s Merton Miles said IMAs didn’t necessarily suit passive investors.
“Passive investors don’t want such heavily active involvement with their investments and are often okay with managed funds and paying a commission,” he said.
But with returns as high as 40 per cent, IMAs were nevertheless a superior option to managed funds for those with significant assets, Clime national manager (private client services) James Chihambakwe argued.
Unlike the pooling of assets in managed funds, IMA investors own underlying securities individually, he said, allowing greater opportunity for tax minimisation through management of capital gains and losses.
While conflicts of interest may be fading, educating advisers on how to deal with IMAs was the next step, Chihambakwe said.
According to Chihambakwe, advisers have neither the resources nor expertise to select and continually monitor stocks in a client’s IMA.
“Rather, their time should be spent advising clients,” he said.
Chihambakwe predicts advisers will thus start to outsource IMA services to dedicated managers, in the same way many currently outsource paraplanning services.
Despite the recent focus on IMAs, Montgomery argues they have long been the method of wealth-generation for the rich.
While today’s IMA products, some with minimum investment amounts of $250,000, still tend to be the domain of high-net-worth individuals, Chihambakwe insists financial advisers can play a key role.
“If I’ve been with an adviser since I was 20, but I’m now 60 with a large sum of money to invest, I’ll still tend to adopt products advised by that person,” he said.
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