Key factors to consider before using managed accounts

Speaking ahead of the ifa Future Forum 2022 in November, Lonsec CEO Michael Wright attributed the rising use of managed accounts to strategic reasons, including the ability to professionalise the investment solutions capability of advisers, and leverage professional full-time investment managers who regularly consider geopolitical risks and the macroeconomic environment before making investment decisions.

For advisers considering using managed accounts, Mr Wright suggested that they question whether using them would professionalise their investment solutions capability and allow them to increase their capacity, profitability, and practice sustainability.

When asked if it would also reduce the cost of obtaining advice for clients, Mr Wright suggested that this would require reducing the “sheer load of regulatory compliance” on advisers.

“I think the Quality of Advice Review has some components that may help reduce that, and advice practices could then pass on those savings to their clients,” he said.

“As we work towards making advice more affordable for clients, I think the regulatory load on advice practices has to be lessened for sure.”

Mr Wright’s comments preceded the ifa Future Forum, which is being supported by gold partner and Lonsec-owned managed discretionary account provider, Implemented Portfolios.

The SPDR ETFs/Investment Trends 2022 Managed Accounts Report found that out of the 661 advisers surveyed, 53 per cent reported using managed accounts for their client investments, up from only 16 per cent in 2012.

A further 18 per cent of advisers said they would potentially use managed accounts in the next 12 months.

“If we think about the current environment and what’s happening on a geopolitical level, you’ve got the conflict between Russia and Ukraine, and its impact on a lot of things including food and energy supply and prices,” Mr Wright told ifa.

“At the macroeconomic level, we’ve got inflation at 6.1 per cent. So, imagine being an adviser in a small practice trying to keep abreast of all these issues so you can construct client portfolios accordingly. That’s pretty tough.”

From an operational perspective, using managed accounts saves advisers time by reducing the administrative work around investment management, which could allow advisers to service a larger number of clients, Mr Wright posited.

According to the SPDR ETFs/Investment Trends report, advisers who used managed accounts said they saved 15.7 hours on average on a typical work week in 2022, up from 13.0 hours in 2020.

“Saving this time is an opportunity for advisers to create a more profitable business because advisers could use the free time to service more clients,” he said.

“There are currently 2.6 million Australians currently looking for advice and with an ageing population, that’s just going to grow exponentially. On the supply side, there’s a significant crunch on adviser numbers.

“Therefore, the ability to free up time to help more clients is critical, which could then drive more profitability for advice practices.”

Ifa Future Forum offers practical value

The ifa Future Forum 2022 will provide practical solutions to ensure long-term relevance of advice practices and the industry.

Centred on the theme of the “great advice reset”, the free one-day event in November is an opportunity for advisers to reassess how they operate, and how they could evolve and expand their advice model to meet the modern demands of new and emerging clientele.

Commenting on Implemented Portfolios’ partnership with the ifa Future Forum, Mr Wright said the event offers practical value for advice businesses, which he added is key for the Lonsec group.

“During this critical time for the advice industry, we think it’s more important than ever that advisers are armed with strategies to help them ensure long-term relevance. Of greater importance is long-term viability so advisers can help more clients than ever, especially when there are so many Australians needing and seeking advice,” he concluded.

The ifa Future Forum 2022 is jam-packed with think tank-style sessions on how advisers could crush constraints and grow their practice capacity while increasing profitability and business value.

Click here to register for free and make sure you don’t miss out!

For more information, including agenda and speakers, click here.