Through the managed accounts lens - Managed accounts: $60b by 2020

The managed accounts sector enthusiastically supported IMAP’s portfolio management conference in July, with over 220 delegates ensuring this inaugural event was sold out. Jayson Forrest reviews some of the highlights of this conference, including in-depth reviews of two panel discussions.

Managed accounts: $60b by 2020

In officially opening IMAP’s Portfolio Management conference on 24 July, IMAP chair Toby Potter said the theme of the conference – Through the Managed Accounts Lens – was chosen to reflect the rapid growth and interest in managed accounts by the financial services sector.

Potter confirmed that funds under management (FUM) in the managed accounts sector in Australia was closing in on the $50 billion mark. He believed this figure would be supported by the results from the latest ‘Managed Accounts FUM Census’.

Daniel Toohey 
Executive Director 
Morgan Stanley
Interestingly, in a keynote presentation by Morgan Stanley executive director, Daniel Toohey, he actually predicted the managed accounts sector to hit the $60 billion mark by 2020, and this figure, he believed, was still “probably too conservative”.

Morningstar Chief Investment Officer (Asia Pacific), Andrew Lill provided delegates with some interesting insights on the managed accounts sector from a client perspective. These insights were gathered from research Morningstar had conducted in this space.

According to Lill, Morningstar identified eight core client needs of what a managed account should like. These included:
  • Be professionally managed;
  • Be transparent, enabling clients to see exactly what is in their portfolio;
  • Have beneficial ownership;
  • Be flexible, including access to investment tools;
  • Have fewer holdings, so clients know what that are holding;
  • Have a tax-effective structure;
  • Have reduced administration; and
  • Have optimised portfolio reporting.
However, Lill said that despite these core requirements, there were still a number of challenges that the sector had to deal with to address these client needs, in order for more consumers and planners to take up managed accounts. In particular, Lill identified the following five challenges confronting the sector, which he said were also opportunities:
  1. A limited ETF product range;
  2. Market cap based;
  3. Consumer education (what is a managed account and why would would a client use it);
  4. Slow take up (dealer groups not incentivised to offer them); and
  5. Most SMAs were Australian equities focused.
“By understanding the needs of clients and properly responding to the challenges faced by the sector, managed accounts will continue to grow,” Lill said.

“The key to survival for planners is their client value proposition, differentiation, a focus on costs, repeatable investment processes that generate consistent returns, compliance and best execution processes, and adaptable business models. This is where managed accounts come into their own.

“The managed accounts sector needs to do a better job of communicating this story to the advisory community and end clients alike, and that’s where technology can help.”

There were 28 speakers at this year’s IMAP Portfolio Management conference, which included four keynote presentations and eight panel discussions. Throughout the conference program, there was a clear focus on portfolio management and managed accounts investing.

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