Winners not certain in SMA rollout
Banks,platform providers and technology providers are likely to be the groups to benefit from the roll out of separately managed accounts (SMAs) into the Australian market, because they have the resources and capability to become active in the market from the outset.
Despite these factors,Colonial First Statestrategic planning and development general manager Nicolette Rubinsztein says there are a number of critical issues that need to be addressed to ensure that even these groups are successful in the SMA market.
Speaking at the recent Orkestrate SMA conference in Sydney, Rubinsztein says these factors include distribution and access to a high-net-worth client base, a large-scale operation, strong technology and strong brand.
On this basis banks would be able to offer SMAs because they have distribution, scale and brand. Platform providers will be able to leverage off existing technology and technology providers will become the source for off-the-shelf solutions for those SMA providers unwilling to build their own systems.
However, Rubinsztein says SMAs may still turn out to be a white elephant and their long-term success in the local market will depend on the time it takes for the product to be introduced and accepted in the local market, as well as the groups offering the product.
But she says demand from advisers has also been low and products have been offered without any bottom-up demand.
“As a group, we have been bowled over by the lack of interest from financial planners, either working independently or within a group,” Rubinsztein says.
“At the moment, the vast majority of financial planners have not heard of, or do not understand what an SMA is, but if they do take off it will not be the first time that has happened because managers are pushing them to advisers.”
“But it will be a slower process because in some cases it will mean moving financial planners and their clients off managed funds for equity investments and that is a big challenge.”
Rubinsztein says SMAs in the US have experienced 23 per cent growth every year since 1994 and would attract 20 per cent of fund inflows by 2010, according to Cerrulli Associates.
At the same time, the level of wealth held by high-net-worth individuals, who are more likely to access an SMA for investments, had also grown in the US.
Despite this, Rubinsztein says this may not translate to the local market, which is more limited in size and while the US has more than two million people with $1 million to invest that figure is only 330,000 in Australia.
Rubinsztein says that SMAs will also be restricted by their access to a small segment of the market in Australian equities, which have $23 billion in funds under management compared to the overall retail unit trust market of $86 billion or the total market of $650 billion.
AUTHOR
Jason Spits
Recommended for you
As the government announces a public inquiry into the collapse of Dixon Advisory, risk adviser Richard Silberman has detailed the three areas that typically lead to an AFSL's collapse.
With a growing number of advisers now running their own business, they need to pivot their career identity to being a business owner rather than just as a financial adviser if they want to futureproof their business.
Zenith Investment Partners has launched a range of new managed account portfolios over the past quarter, including on Insignia Financial’s Expand platform.
The financial services technology firm has officially launched its digital advice and education solution for superannuation funds and other industry players.
