By Jayson Forrest - Managing Editor - IMAP Perspectives
Sarah Brennan CEO - Investment Trends
Uptake of managed accounts accelerates
The appetite of investors and financial planners for managed accounts continues to grow, with new client inflows into managed accounts expected to surge over the next 3 years.
Seventy per cent of Australian financial planners, representing approximately 12,000 practitioners, are now using managed accounts or intend to - up from 44 per cent in 2012.
This was one of the key findings from the SPDR ETFs/Investment Trends Managed Accounts Report, which revealed that financial planners were better able to react to market movements to benefit their clients by using managed accounts during the recent volatility brought on by COVID-19.
The report also found that new client money was increasingly being allocated into managed accounts. Prior to COVID-19, planners on average allocated 12 per cent of new client inflows into managed accounts. However, one year on from the global onset of COVID-19, planners allocated 17 per cent of new client inflows - a 42 per cent increase. In fact, 88 per cent of practitioners said managed accounts helped them save time during periods of market volatility, which were experienced during the COVID-19 pandemic.
Sarah Brennan is the Chief Executive Officer of Investment Trends
Other key findings
- During periods of COVID-19 market volatility, the majority of planners who used managed accounts said these solutions: freed up their time; allowed them to execute transactions faster; and supported a reduction in operational risk.
- The top reasons planners value managed accounts include their ability to shift their value proposition to allow more time for discussing client goals and education.
- Separately Managed Accounts (SMAs) lead the way, with more than 80 per cent of planners saying they implement managed accounts via this structure.
- Nearly 60 per cent of planners use portfolio models that are managed exclusively by an external investment manager.
- The majority of portfolio models recommended in 2020 (66 per cent) were multi asset class.
- There are three attitudinal segments of planners when it comes to selecting investments for their clients: outsourcers, who have minimal involvement; insourcers, who are deeply engaged in the portfolio construction process; and modifiers, who sit somewhere in between.
- Up to 45 per cent of outsourcers say managed accounts have enabled them to shift their value proposition towards a greater focus on a client’s financial and lifestyle goals.
- Up to 35 per cent of outsourcers say managed accounts have strengthened their value proposition by distancing them from the investment returns.
Source: SPDR ETFs/Investment Trends Managed Accounts Report