Arthur Naoumidis, managing director at SMA technology provider Praemium, has said the firm has seen a lot of new BlackRock SMA accounts set up in the past few months as a result of the current market rout. “Psychologically, in this period, having direct beneficial ownership from a risk management perspective is a great selling point,” he said.
Tracy Byrne, director of the Institute of Managed Account Providers (iMap) and chief executive of Dais Financial Services, also said the timing may be ripe for investors to switch into an SMA because of the end of the bull run. "We’ve had a bull market running at 30 per cent per annum for the last five years. There’s a lot of [embedded] capital gains associated with that."
"Without the market correction, it would probably have been more difficult to move out of managed funds into SMAs because of the tax consequrences but in the last six months, it has become more attractive to consider the SMA option."
Pentafin OneVue Managed Accounts chief executive Brett Marsh said Lift and Opes’ problems stem primarily from the breakdown of trust and the tricky clauses. But the outcome is that more advisers and investors are inquiring about SMAs.
“There’s an enormous interest now in managed accounts. With most of the groups that I speak with, there is a bias using the managed investment scheme, or an IDPS type scheme. We believe the reason is that financial planners are already operating in that model now and that by using SMAs, the quality of the product improves remarkably,” said Marsh.
The SMA demand could also increase after Praemium announced it would actively lobby for the government to provide rollover tax relief for investors switching out of legacy managed funds and into the equivalent SMA model.
"If an investor wants to move from an opaque, expensive and tax-inefficient managed fund to an equivalent transparent, cost and tax effective SMA; they should be able to do so without being concerned about the resulting capital gains tax issues," said Naoumidis.
Michelle Baltazar and Ruth Liew