Consumer education still lacking with managed accounts

While the number of financial planners recommending managed accounts almost doubling in the last five years, more than 80 per cent of potential users (consumers) say they have only basic or no understanding of the solution.

This was one of the key findings of the SPDR ETFs/Investment Trends report.

According to the study, the rapid uptake of managed accounts in the previous five years is set to continue. Together with the 35 per cent of planners who recommended managed accounts – up from 30 per cent in 2018 – another 31 per cent of planners intend to introduce managed accounts in the near future. However, 40 per cent of these potential users note that client education is one of the main barriers to entry.

“The number of planners recommending managed accounts reached the highest level ever in 2019 and there remains many more who are interested in this solution,” said Meaghan Victor, Head of SPDR ETFs, Australia and Singapore.

“These potential users have a strong appetite to build their understanding further, as they want to tap into the tangible benefits reported by current users. These include improved investment performance, transparency, enhanced client engagement, cost effectiveness and less administration.”

Referring to the study, Michael Blomfield, Chief Executive Officer of Investment Trends Australia, said: “Those who use managed accounts recognise a wide range of client benefits. More than half believe transparency is the key attraction for clients and 30 per cent report that following the implementation of managed accounts, investment returns achieved by their clients has increased. This is accompanied by 44 per cent of users saying client engagement has increased.”

The survey also showed that 49 per cent of planners using managed accounts reported a reduction in time spent on administration and compliance.

Victor added: “Compliance continues to play a central role in a planner’s choice of the managed accounts structure. The changes currently experienced by the industry, including regulatory changes, support the widespread adoption of Separately Managed Accounts (SMA) by planners. In fact, 51 per cent of planners say they chose to employ SMAs because of the lower perceived compliance requirements.”

The research found that SMAs are favoured by the local planner community, with 68 per cent of planners currently utilising SMAs on platform.

In addition, 76 per cent of planners using an in-house Managed Discretionary Account (MDA) chose this structure because of the associated flexibility and control it could offer.

“Managed accounts are fast becoming recognised as a valuable tool; with 80 per cent of planners who use managed accounts directing new business to these products in the last year. Those who recommend managed accounts say 31 per cent of their funds under advice are currently in this product solution, and on average, they expect this to grow to 52 per cent by 2022,” Victor said.

The State Street Global Advisors SPDR ETFs/Investment Trends 2019 Managed Accounts Report is based on an online survey of 760 financial planners conducted between 3 December 2018 and 1 February 2019.

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