‘Obstacles to scalability’: Using managed accounts to spend more time with clients

Recent research from Investment Trends and SPDR found that the number of advisers using managed accounts has tripled over the past decade to 56 per cent, while a further 19 per cent are “potential users” of managed accounts.

Speaking at the Institute of Managed Account Professionals (IMAP) Advice in Action conference in Sydney last week, Brent Bevan, head of investment consulting at MLC Asset Management, said the growing number of advisers taking advantage of managed accounts still need to ensure they are choosing the right partner.

“I’ll use the word partnership because that’s exactly what it is. This isn’t dating, it’s a marriage when you get involved in these things,” Bevan said.

“Hence, getting it wrong and finding another manager is a very time consuming and costly process. You need to make sure that you know you’re partnering with someone who you think you’re culturally aligned with, whose investment process and philosophy you can get behind. You don’t have to agree with every single part, but you can certainly align to it.”

Kyle Lidbury, head of investment research at Perpetual Private, added that when looking for a solution in the managed account space, many advisers are doing so to service a greater number of clients.

“We know that advice is costly and it’s hard to scale, so removing obstacles to scalability is really important in terms of growing your business,” Lidbury said.

“The opportunity of managed accounts is absolutely there. Spending more time with clients, more time advising, we know that manager research is time consuming and costly, it requires maybe a different set of skills, so being able to outsource that is the opportunity to make your business more scalable.”

The ability to deploy an investment strategy quickly and efficiently, he added, is also driving the adoption of managed accounts.

“If you’re not using managed accounts, does the client understand that it could be up to 12 months between the time that that investment decision is made, versus when that’s reflected in that portfolio?” Lidbury said.

“Would they be happy with that? Scalability is becoming increasingly important. Technology is there. I think if you’re not running a scalable practice that’s not just limiting your own growth, but it’s actually also opening yourself up to questions from your clients as well.”

David Bainbridge, head of governance at Lifestyle Asset Management, added that he sees a lot of advisers that have “lopsided portfolios”, which can be fixed with the use of managed accounts.

“We have been critical of some of the new advisers coming into our practice about having lots of what I call lopsided portfolios, and I sit down and work through with them what they need to be doing with their portfolio structure,” Bainbridge said.

“They come to realise that having managed accounts makes life much simpler for them, and they can come up with much more predictable outcomes through managed accounts.”

However, Bevan explained that managed accounts are not for every adviser, particularly one that has their investment decisions tied into their value proposition.

“I think, on balance, outsourcing tends to be the better outcome for most advisers, but not always,” he said.

“If your value proposition is incredibly tied up in the decision making of investments, if you’re out there saying, ‘I’m the Bobby Axelrod of the firm’, then a managed account is probably just not going to work well for you.

“Someone else is going to take that value proposition, and the first time a client asks, ‘Well, isn’t this what I’m paying you for?’ then any notion of rolling out a managed account is going to end pretty quickly.”