Funds under management in managed accounts had risen to $95 billion at the end of 2020, up almost 20% on the six months to 30 June 2020. According to the latest census from the Institute of Managed Account Professionals, while a stronger sharemarket in the second half of the year certainly contributed to FUM, so did the positive net fund inflows of almost $7 billion[i].
The growth in managed accounts (MAs) has been immense in recent years, partly driven by their simplicity and potential tax-effectiveness, but also due to changing regulation as advisers have adopted fee-for-service models and looked to improve business efficiency.
If you are an adviser who is already using MAs, you will be well-versed in their benefits. MAs may enable you to allocate your clients’ funds into model portfolios, giving you discretion over investment changes. This includes implementing portfolio rebalances quickly when changes are required, as well as replicating all trades for all clients simultaneously – often with no need for additional client permission, forms or ROAs.
Depending on the legal structure you select as well as the MA provider, your portfolios can be constructed using a selection, or combination, of different investments, including managed funds, shares, or ETFs. MAs are available within the tax-efficient wrapper of superannuation, or outside as part of a broader investment portfolio. Building your own MA model portfolios can reflect your investment philosophy and approach, enabling you to replicate your investment advice across all, or a selection, of your clients.
Not all managed accounts are created equal
With all the benefits offered by MAs, it’s clear to see why their growth has been so explosive. But before jumping headfirst into this pool of flexibility and efficiency, it’s important to understand that not all MAs are the same. Each MA provider, and the legal structure in which the portfolios are housed, offers different features and benefits and you need to be clear on what services you require, if you are new to MAs, or to consider whether your current provider offers everything you need for your business and clients.
Advice businesses that have investment management capabilities backed by a robust strategy and methodology, may consider offering tailored MAs to their clients. In such circumstances, in addition to the legal structure proposed, it’s important to consider the technology of the platform provider and the additional MA costs, as together these factors can impact your clients’ best interests.
It’s important to understand the technology offered by your MA provider. What systems are used, how automated or seamless is data connectivity and transfer of information through the technology stack?
Will the professional investment manager need to manually provide portfolio rebalance details, or can data be uploaded efficiently? How sophisticated is the technology architecture that sits behind the input screens?
Does the adviser desktop CRM system integrate with the platform to enable straight-through processing (STP) instructions when implementing advice recommendations for clients into the selected MA portfolio?
Are there additional costs to the advice practice or to clients with a tailored MA, such as Responsible Entity fees, service fees, product fees and transaction fees? Current industry practice has these costs sitting on top of platform administration fees and advice fees.
Buyer beware the underlying transaction costs that may be charged within the MA portfolio when trading, such as brokerage and managed fund costs. Will you as the advice business choose to absorb these additional MA costs (thereby increasing business operating costs), or will you pass them on to clients as higher administration fees?
Managed accounts with Allan Gray Solutions
Within Allan Gray Super and Allan Gray Investments, we offer a private-label MA solution that can support your business strategy and enable you to offer a scalable business model with your own investment philosophy and investment approach for your clients. Offering your MA model portfolio through Allan Gray Solutions provides a range of benefits:
- Save time – implement investment and rebalance decisions quickly and simultaneously for all clients
- A wide choice of investments – hold up to 790 managed funds, as well as shares, ETFs, LICs and term deposits
- Cost effective – there are no product or service fees for creating your model portfolio through Allan Gray Solutions
- Increased efficiency – helps reduce the time spent on ROAs, compliance obligations
- Your own white label – our private-label MA model portfolio can be branded as you choose, and offered exclusively to clients of your advice group.
We also offer personalised service, with dedicated contacts who will help you transition your business, provide training and support you and your team the whole way.
To find out more about Allan Gray Solutions and our managed account offering, including to create your own managed account portfolios where you have solid investment management capabilities, please contact us to speak to your local Allan Gray Relationship Manager or contact our Client Services team.
OneVue Wealth Services Limited ABN 70 120 380 627, AFSL No. 308868 is the Responsible Entity and the Operator and Facilitator of the Investor Directed Portfolio Service which includes Allan Gray Investments. Diversa Trustees Limited ABN 49 006 421 638, AFSL No 235153 RSE Licence No L0000635 is the trustee of Allan Gray Superannuation and Allan Gray Retirement. Allan Gray Superannuation and Allan Gray Retirement are superannuation products within OneSuper ABN 43 905 581 638 RSE R1001341.