Managed accounts shaving 17 hours a week from advice practices

A new report issued by State Street Global Advisors and Investment Trends has revealed that the proportion of advisers using managed accounts had surged from 17 per cent a decade ago to a record high 56 per cent last year amid inflationary pressures, rising interest rates, market volatility, and geopolitical tensions.

According to the findings of the 14th SPDR ETFs/Investment Trends Managed Accounts Report, a further 22 per cent of advisers are potential managed accounts users, taking the possible reach in the coming years to 78 per cent.

Commenting on the findings, State Street Advisors’ vice-president and ETF model and portfolio strategist, Sinead Schaffer, said managed accounts’ ability to support advisers’ holistic approach to financial planning is the reason behind their strong adoption.

“Advisers using managed accounts direct 41 per cent of new client flows into them, a four-fold increase from 10 per cent a decade ago,” Ms Schaffer said.  

“In addition, managed account users allocate, on average, 76 per cent of their clients’ total investable assets into managed accounts.”

Moreover, Ms Schaffer revealed that multi-asset class models made up almost three quarters of recommended managed accounts, while advisers reported that ETFs, direct shares, and managed funds were the most popular products in managed account portfolios over the past year.

Turning to benefits, Sarah Brennan, chair of the Investment Trends advisory board, revealed that the most commonly cited advantages of using managed accounts were time savings, reduced risk, and compliance.

Namely, according to the report, as many as 63 per cent of advisers cited “freeing up their time” as one of the main benefits, with managed accounts said to help them, or their support staff, save 17.1 hours on average in a typical work week.

Furthermore, the study revealed other significant findings indicating that managed accounts can significantly enhance an adviser’s value proposition. Specifically, as many as 45 per cent of advisers reported they had a greater focus on client goals and 39 per cent specified their value proposition changed to outsource portfolio construction to professionals.

As for how managed accounts are used, Ms Brennan revealed that the managed accounts segment targeting clients with investible assets ranging from $250,000 to $1 million was one of the most significant.

“Two in five current managed account users indicated that clients aged 35–49 are appropriate to hold the majority (e.g. over 75 per cent) of their portfolio in managed accounts and over a quarter indicated managed accounts are appropriate to hold the majority (e.g. over 75 per cent) of the portfolio for SMSF clients,” Ms Brennan said.

The research also indicated that while performance and fees remained important factors for advisers when recommending managed accounts to their clients, factors such as availability on investment platform and the reputation of the asset manager were becoming more prevalent.