Managed accounts and ETFs continue on growth trajectory

Managed accounts have climbed to over $144.5 billion in assets under management (AUM), 200 per cent higher than five years ago, as adoption among advisers continues to increase.

Marking the release of the 14th SPDR ETFs / Investment Trends Managed Accounts Report, State Street Global Advisors’ vice-president and ETF model portfolio strategist, Sinead Schaffer, told a recent media briefing that $23 billion of the total managed accounts AUM was in ETFs.

“About 15 per cent of what sits in managed accounts is exchange traded funds,” she said.

“It’s all about that democratisation of wealth, you know, providing access to the end client to institutional professional funds management and that’s what both managed accounts and exchange traded funds are doing.”

The report found 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, and a further 22 per cent of advisers were identified as potential managed accounts users.

Of those advisers using managed accounts, 63 per cent reported using ETFs as an underlying product, ahead of direct shares (57 per cent) and active unlisted managed funds (55 per cent).

“Those that are looking at using managed accounts, so the potential users are actually 33 percent saying if they saw more ETFs in managed accounts, they’re more likely to use them,” Ms Schaffer added.

“That just adds to that story that we think that there’s going to be increased usage in managed accounts and increased growth in the ETF space as well.”

While time saving was the most common benefit reported by advisers using managed accounts, State Street and Investment Trends’ research also identified a number of other benefits.

“Forty-seven per cent are saying a key benefit is the effective way to access professional funds management, and that comes back into that story around the democratisation of wealth,” said Ms Schaffer.

“We’re also having people cite a key benefit as 41 per cent saying it’s an appropriate solution to meet client best interest obligations. So, what does that mean? It means that they’re adhering to regulatory obligations that are being placed on their business and thinking about the client and putting the client’s needs first. These solutions are doing that for them.”

According to Ms Schaffer, the proliferation in the growth of managed accounts seen in Australia to date is expected to continue “far into the future”.

“If we look across the pond and what’s happening in the US, who has been leading the space in model portfolios and managed accounts, they’re sitting at $2 trillion. That’s a pretty significant number and it suggests that Australia’s got a long way to go,” she said.

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.