By Jayson Forrest - Managing Editor - IMAP Perspectives
Managed account adoption tipped to reach 52% in 2022
While ‘big data’ and artificial intelligence (AI) will play a growing role in the delivery of financial planning advice to Australians, their greatest impact is yet to be felt. However, the use and rapid adoption of managed account technology is providing advice firms with an immediately scalable, efficient and transparent way to roll out their investment philosophy.
This was one of the key findings from Netwealth’s 2020 AdviceTech Report, which found that four in 10 advisers (41.8 per cent) believe investment execution and implementation, including records of advice (ROAs) and document exchange, will be significantly affected by technology in the next five years.
The report found the COVID-19 pandemic had clearly highlighted the benefits of managed accounts to advice businesses. According to the report, in a volatile market, where investment decisions are required to be made quickly, managed accounts allowed advice firms to make these decisions and implement them almost immediately, and across their entire client base.
In doing so, the report identified the efficiency of managed accounts, which freed advisers from the time-consuming constraints and laborious task of issuing ROAs, and then having to chase clients to obtain their consent for the implementation of investment changes. Instead, the adoption of managed accounts enabled these practices to seamlessly rebalance portfolios for all clients.
The report found that the COVID-19 pandemic had clearly highlighted the benefits of managed accounts. In a volatile market, where investment decisions are required to be made quickly, managed accounts allow advice firms to make these decisions and implement them almost immediately, across their entire client base.
Best results achieved by AdviceTech Stars
According to Netwealth, streamlined investment execution and more timely trading during times of market volatility led to better results or ‘execution alpha’ for all clients, not just a select few, further enhancing an adviser’s value proposition.
These are advice businesses that successfully use technology that bring tangible benefits to their business and their clients.
In the 2020 report, these AdviceTech Stars led the way with the use of managed accounts, with almost half of them (46.4 per cent) already using managed accounts, compared to 37.4 per cent of the rest of the industry.
However, with an additional 13.8 per cent of advice practices saying they intended to use managed accounts in the next 24 months, the potential industry-wide adoption of managed accounts could be 52 per cent by 2022.
Over 300 advice firms were surveyed in March 2020 for the Netwealth 2020 AdviceTech Research Report.
The report identified that rather than being constrained by the time-consuming and laborious task of issuing RoAs and then chasing clients to obtain consent, the adoption of managed accounts enabled these practices to seamlessly rebalance portfolios for all clients.
Technology is driving cahnge in investment execution & advice processes
