Licensees employing managed accounts for bespoke client offerings
It is not just advisers driving the adoption of managed accounts as advice licensees are developing their own bespoke strategies.
The latest annual State Street Global Advisors SPDR/Investment Trends Managed Accounts report surveyed almost 950 advisers on their attitudes and usage of separately managed accounts (SMAs) and managed discretionary accounts (MDAs).
Managed accounts are used by 59 per cent of advisers, typically allocating close to three-quarters of total client assets into the accounts. Almost half (48 per cent) of new client inflows are being directed to the products, up from 41 per cent in 2024. As a result, total assets under management have risen to $232.7 billion.
Most advisers cited the time savings brought on by their usage as the main benefit, saying they could save 23.9 hours per week. This subsequently allowed them to serve more clients, strengthen client relationships, and focus on client goals.
Other benefits cited included the effectiveness of implementing model portfolios, lower compliance burden, reduced business operational risk, and lower level of fees.
While off-the-shelf models remain the dominant type of usage at over 70 per cent, just over a third said they were using models which were custom-built for the licensee or practice.
Commenting on this, Investment Trends chief executive, Eric Blewitt, said: “It is not just advisers who are driving adoption of managed accounts, licensees are using them to manage their risk.
“Some may be starting with off-the-shelf versions, but then they have their own in-house views based on their clients, so they are modifying them based on these views or specialisms which their advisers are encouraged to use.”
The number of advisers who say they are encouraged to start using them by licensees has also been steadily rising, sitting at 20 per cent in 2024. Around 5 per cent of advisers who aren’t currently using managed accounts said they would start if it was encouraged by their licensee.
This echoes findings by MSCI that wealth managers say it is difficult to manage their company’s in-house views with the specific needs of their clients who demand greater personalisation of their investments.
Another finding, noted by State Street’s model portfolio strategist Sinead Schaffer, is that advisers have reduced the number of models they are recommending to clients from 18.2 in 2024 to 12.1 this year, a reduction of 33 per cent.
Speaking to Money Management, she said: “This is a significant drop and can be attributed to the onerous due diligence requirements involved in their selection. Australian advisers typically have five tools and do it externally or via outsourcing, whereas advisers in the US only use two and carry it out in-house.
“As a result, both adviser and licensee have reduced this burden and simplified their approach by reducing the number of strategies they recommend.”
Last week, research by IMAP/Milliman for its latest FUM census found managed accounts grew by $27.2 billion in the six months to 31 December and saw net inflows of $14.3 billion.
AUTHOR
Laura Dew
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