Why managed accounts are the future

The ifa team sat down with BT’s Chris Mather to discuss why managed accounts are the future and how advisers can benefit from dipping their toes in this particular investment management product.

While 70 per cent of Australian advisers are using or intending to use managed accounts (Investment Trends report 2021), around 5000 advisers are yet to jump on board. Why should advisers explore managed accounts and what are the benefits?

Managed accounts hold strong appeal because of the efficiency gains advisers can enjoy, especially when they move from paper-based models to managed accounts on a platform with full digital features.

At BT we’ve seen tremendous growth in this area. Last year alone there were 64 managed accounts added onto BT Panorama. Around 70% of net flows on BT Panorama are now going into managed accounts.

That’s not to say that managed accounts are right for all advice businesses. However, I encourage those advisers who might be hesitant about dipping their toe into managed accounts to speak with other advice businesses, big and small, so they can decide what’s the best solution for themselves.

What we’re seeing at BT is managed accounts are so flexible and we do offer such a broad range, that both large practices and boutiques can find a solution that suits them and their clients.

At BT, advisers can choose from managed portfolios that are already on the platform; and they can also develop their solutions or use platform technology to develop digital portfolios, either under consent-based models or managed discretionary account (MDA) services. We support advisers with developing a more tailored solution across a variety of implementation methods.

There’s a lot of options, and my team’s job is to help advisers navigate the managed account landscape so they can find the best solution. 

The uptake of managed accounts has increased over the last decade, but more prominently during the pandemic, why is that and what do managed accounts do for advisers and their clients?

The uptake during the pandemic largely reflects the momentum behind managed accounts longer term. But also during the pandemic we’ve seen a lot of market volatility, and this is when speed of implementation can make a significant difference.

Normally, an adviser who’s not using a managed account is required to produce advice documentation before an asset is bought or sold (for example, a record of advice or ROA).

With managed accounts, advisers typically do not need to consult with clients about every transaction. Clients’ holdings are automatically rebalanced so they hold their investment manager’s optimal portfolio at all times, and transactions can be placed in ‘real time’.

This can result in more consistent portfolio outcomes. Advisers are not faced with the potentially difficult choice over the order in which they engage with clients when markets are volatile and speed is of the essence.

So by using managed accounts, advisers can achieve the outcomes they are seeking for clients more quickly while also meeting their compliance obligations, especially when markets are volatile.

The pandemic has accelerated technology adoption in financial services and managed accounts have enabled advisers to manage portfolios and respond to market events in a quick and efficient way, that’s a major part of their appeal.

Do you expect uptake to continue as we begin to permanently adopt some of the changes brought about by the pandemic, such as remote work?

We do expect managed accounts will continue to grow, and at BT it’s a crucial part of our growth strategy.

Research has shown that managed accounts capability is becoming increasingly important as a key driver of platform selection. (According to Investment Trends’ Planner Technology Report, May 2021, managed accounts capability was cited by significantly more advisers than previous years as a key driver for the selection of their main platform. In 2019, 19% of advisers cited it as a reason to favour their main platform; in 2021, 28%.)

Many advisers will most likely continue to do a portion of their work from home – and enjoy the flexibility, convenience and speed that managed accounts on contemporary platforms can offer, when it comes to account management and implementing investment strategies.

Clients too have accelerated their adoption of technology – and we are seeing this at BT, with clients showing a strong preference for logging into BT Panorama via our mobile app, over desktop.

As adviser-client interactions become more digitally-based, we are ensuring that BT continues to support advisers with the right technology. We’re proud to have been recently awarded 'Best Mobile App' by Investment Trends for the fourth year running, along with 'Best Client Portal'.

Now, managed accounts also give you the opportunity to tailor accounts to suit the needs of the adviser, tell us more about the different ways that they can be structured?

Sure. As we’ve discussed, there are off the shelf solutions that are available to advisers and their clients who are on the BT Panorama platform.

Advice practices that want more control can choose to implement licensee portfolios that allow them to create their own portfolios (SMAs).

Then there are tailored portfolios, which advice practices can implement with their own MDA licence or using a third party MDA license. We also have digital portfolio management tools which can be used in conjunction with our ROA (record of advice) generation capability and/or consent workflow.

Why is it important to have a broad range of solutions to choose from?

Advice businesses cater to a broad range of clients, and have different needs, and so our managed account solutions need to reflect that diversity and offer flexibility.

Managed accounts are also a really good way to manage the cost of delivering advice and to aid advisers with compliance, which translates into more time spent with clients. Please elaborate on this.

Some of the major benefits that managed accounts bring at the practice level are:

• As we’ve discussed, managed accounts can result in more consistent portfolio outcomes because clients’ holdings are rebalanced automatically, and transactions can be placed in ‘real time’. This alone results in efficiencies as advisers don’t have to wait until review time or when the client gives consent, and so the process is more streamlined.
• Managed accounts in many instances have a clear structure, process and governance overlay. And this can help advisers achieve their compliance obligations. Managed accounts are generally run by specialist investment managers, or in some cases the investment division of a licensee, and are generally implemented through a managed investment scheme (MIS) or MDA structure. They have clear mandates, parameters and rules to manage the portfolio.
• Implementing these more efficient processes then translates to time savings for advisers. They free up time which they can then use to grow their business and manage relationships with existing clients. Managed accounts also reduce risks for an advice practice because the operational elements of portfolio management are centrally managed by outsourced professionals.

Do you have any success stories that you would like to share with us, perhaps including advisers you’ve worked with that have upped their efficiency with managed accounts? 

Among the new managed accounts recently added to BT Panorama are four diversified managed accounts for PKF Wealth, who have around 1,000 clients.

The suite of managed accounts has seen strong take-up across the practice. In just six months since they were launched, over $100 million have gone into the managed accounts.

The key catalyst for their move across to managed accounts on the contemporary BT Panorama platform was the recent migration of their clients from BT Wrap.

PKF Wealth had always followed a paper model with good outcomes for clients. But they wanted a better and more efficient way to administer client portfolios: number one, as their business has grown, so they wanted to achieve efficiencies of scale; but also in light of the market volatility we’ve seen recently. They’ve said that the managed accounts have been well-received by clients too, so it’s a win-win.