In a landscape as dynamic and evolving as Taylor Swift's career as she steps onto stage at Accor Stadium in Sydney tomorrow night (so much coverage!), the financial advice sector is witnessing its own revolution, albeit more recently with the increasing adoption of managed accounts by advisers. Persisting with our annoying, headline-grabbing analogy, just as Swift has masterfully navigated the changes in the music industry, advisers are turning to more adaptable and personalised services, enhancing their relationships with clients in a way that mirrors the connection between Swift and her global legion of fans.
For the first time since managed accounts, usage was tracked by both ourselves and IMAP. More advisers than not are now using managed accounts for all or a portion of their clients.
Source: Adviser Ratings - % Australian Advisers Using Managed Accounts 2019 - 2023
Nick Topham, the CEO of ProductRex, underscores the significant momentum of this movement, stating, "Managed accounts on the ProductRex platform have seen a consistent increase, more than doubling from 500 to over 1,000 in just one year with billions now being modelled into managed accounts as part of their portfolio construction."
However, this growth has not been without controversy. Some argue that advisers are becoming mini fund managers, with a shift in margins from the old commission models creating new conflicts of interest. ASIC started to express concerns back in 2019 (per Connexus’ licensee summit) - especially around ‘the complexity of the fee arrangements'. At the time, Rhys Bollen, the regulator’s senior executive leader of investment managers, stated concern as to whether the client’s best interests were front of mind for the advisers advocating for managed accounts.
Despite these debates, the trend is clear. Per the latest data from IMAP, there is now more than $150 billion in managed accounts.
The main argument for managed accounts is ostensibly around more personalised solutions and efficiency gains. According to Investment Trends' February 2020 Managed Accounts Report, advisers using managed accounts saved 15.7 hours per week equating to approximately 100 days a year.
The rise of professional investment consultants has, of course, gone hand in hand with the growth of managed accounts and custom portfolio construction. These consultants have become ingrained as key cogs in the decision-making across licensees and practices, in terms of managed account creation and acting as gatekeepers for asset managers and other product manufacturers looking to access financial advisers.
Amidst this evolution, the contest for platform Funds Under Advice (FUA) continues, with traditional platforms regaining their footing and Super funds grappling with post-retirement outflows. Platform switching decisions are becoming increasingly strategic, with advisers positioned to leverage this transition. Investment options' quality particularly as it relates to managed accounts, suitability, flexibility, and customisation, along with competitive pricing, are central to remaining competitive in the eyes of advisers.
As we look to the future, the increasing integration of managed accounts is indicative of a sector that is not only adjusting to change but proactively shaping it. Decision making is constantly shifting, with advisers, platforms and investment consultants playing far bigger roles than from years past. Advisers are not just keeping pace with industry shifts; they are leading the charge towards a more customised, efficient, and responsive financial advice sector.
And with that, what will be the industry’s “Kelce” and bring a new legion of interest (hopefully consumers and not just managed account providers) into advice… Enough Tay Tay references for today.
ProductRex is Australia’s fastest growing SaaS platform dedicated to handle superannuation and investment product recommendations. ProductRex is free to use for all financial advisers, paraplanners and administrators within financial planning practices.
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