Are we heading back to the future?

Is there a future for licensee-based managed account programs?

  • The Hayne Royal Commission didn’t ban vertical integration but it continues to be widely questioned.
  • The growth in managed accounts slowed to a trickle by December 2018.
  • Attendance at Best Interest Duty events is at an all time high.

Are these signs that the growth in the use in managed accounts has come to an end?

Are we going to see a return to the old days where every piece of advice is created as a ‘one off’ and every recommendation is a matter of personal risk for advisers?

Are we heading back to the ‘pre industrial’ version of advice where there are few economies of scale, increasingly questionable economic models and high variability in outcomes for clients.

Well, no actually.

The business models which survive will be those which are able to deliver high quality service to investors that meets their individual needs and yet does so in a compliant and efficient manner.

Managed accounts will be central to these business models because only the improved processes which they embed, will be able to meet the requirements that will be imposed on advisers and their licensees.

Which business models will be sustainable in the future?

Clearly, there will be a number of business models that will be sustainable for advisers.

Smaller businesses dependent on the business principals for finding and servicing investors. Many will band together to own their licence. For this group, managed accounts will be central to being able to effectively implement recommendations for many clients and to offer a service that enhances the adviser’s positioning as a specialist.

Accounting-based advisers will continue to meet a need for a comprehensive service. With many self-employed and wealthier clients with more complex circumstances, technology that enables the portfolio to accommodate each client’s circumstances will be important.

Institutions will continue to be involved in advice and will likely use salaried advisers as part of their product distribution strategy. Managed account products, particularly SMAs, will be one of a suite of products they will continue to offer.

Licence providers, who support self-licensed firms, already see managed accounts as an important tool in the array of services they provide, in addition to compliance, education and other support.

Clearly, the form of managed account that will suit each of these segments will vary, and that’s part of the beauty of managed accounts. The structure, both legal and investment, is sufficiently flexible to fit in with a range of business models.

However, while advice business models will need the functionality that managed accounts provide, will the regulatory regime that we operate under, allow it?

In our view, it will.

With conflicted remuneration banned and a quite proper focus required by the regulator on managing conflicts of interest, nonetheless, managed account structures will enable advice firms to meet both their own and, more importantly, their clients’ objectives.

Toby Potter


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