‘Democratisation of wealth’: Nearly 3 in 5 advisers utilising managed accounts

The 16th SPDR ETFs/Investment Trends Managed Accounts Report found that financial advisers utilising managed accounts within their client portfolios are saving an average of 23.9 hours per week.

The report, released by State Street Global Advisors together with Investment Trends, found that the proportion of advisers using managed accounts in Australia has reached a new high of 59 per cent, up from just 20 per cent 10 years ago, while another 16 per cent said they are interested in adopting managed accounts.

Meanwhile, advisers using managed accounts allocate, on average, 71 per cent of clients’ total assets into these accounts; managed accounts advisers are directing a record 48 per cent of new client inflows to managed accounts – up from 41 per cent in 2024.

Investment Trends chief executive Eric Blewitt told ifa the efficiency that managed accounts deliver to advisers is “one of the key drivers” for the continued growth in adoption.

“Advice practices cite nearly 24 hours’ worth of efficiency savings in their business using managed accounts compared to previously not, so you’ve got a fair amount of tailwinds in managed accounts for a number of very good reasons,” Blewitt said.

He added: “As adoption increases, the amount of latent demands starts to decrease, but there’s still around about 16 per cent of advisers who are potential users, mainly those who haven’t used a managed account, but may well do so in the coming 12 months.”

State Street Global Advisors’ vice president and ETF model portfolio strategist, Sinead Schaffer, said the benefits go beyond just efficiency for the adviser, with clients also receiving better overall satisfaction.

“If we think about the end investor and advisers, Australian investors are wanting more from their financial advisers,” Schaffer told ifa.

“In the last five years, they’re receiving more service, but they’re subsequently wanting even more. We actually did another study here in Australia, where we asked the end investors about their understanding of being in model portfolio implemented by a managed account, and 50 per cent aren’t even aware.”

She added that for those that are aware they are in a managed account, they are more satisfied with their adviser in terms of feeling their portfolio is being optimised for fee, for performance, issues are being resolved more effectively, and there’s more transparency around their solution.

“I think it’s a two-prong thing that, yes, it comes down to fees, but it also comes down to the satisfaction that advisers are having with that end investor and enhancing that relationship across their whole book that we know is kind of feeding into that ongoing growth,” Schaffer said.

The report also found that 89 per cent of advisers implement managed accounts with separately managed accounts (SMAs) on platform.

“Among current managed account advisers who use SMAs on platform, 71 per cent of them use off-the-shelf model. However, it is interesting that custom-built SMAs are particularly popular with experienced managed account advisers. They are allocating 57 per cent of new client inflows to these tailored solutions,” Blewitt said.

Additionally, 53 per cent of advisers noted ETFs are the underlying products in their managed accounts, which Schaffer told ifa is indicative of the compatibility of ETFs and managed accounts.

“It comes down to that whole concept of the democratisation of wealth, which is what these managed accounts do,” she said.

“Forty-eight per cent said it was a cost-effective way to access professional funds management, which previously only institutional investors could get access to at that kind of price point. So, ETFs are very closely aligned to managed accounts in that sense, in terms of being cost effective ways to access a range of different markets and different investment managers.”

Interestingly, there has been a significant change in the number of models that advisers recommend to clients.

While 68 per cent of advisers recommended multi-asset class models over the last year, the dip in the number has gone from 18.2 in 2024 to just 12.1 this year.

“We put that down to the onerous due diligence process,” Schaffer said.

“It’s pretty resource intensive for the adviser, so they don’t have the bandwidth to recommend [as many], and they’ve reduced that to 12.”

Essentially, both the adviser and licensee have reduced this burden and simplified their approach by reducing the number of strategies they recommend

“That’s pretty much indicative of why we believe we’ve seen that drop when we think about what they are looking at when they make the decision,” she added.

Ultimately, Schaffer told ifa, the increased adoption highlights that there has been a “shift in the value proposition” of what investors expect from financial advisers.

“It’s not just do my asset allocation and leave, it’s a whole of wealth conversation. Now they’re expecting more services from their adviser,” she said.

“To do that, advisers need to think differently than they have five years ago, 10 years ago, about the way that they provided services to their clients. This report says that there is actually a shift to their value proposition.

“So, 22 per cent said they’re able to now provide more tailored services as per what clients are asking for them as a result of these structures, I think it’s 37 per cent are saying that there’s a shift in value proposition so that they’re providing advice around client and lifestyle goals, which maybe 10 years ago they weren’t doing, and that’s what the client was expecting for them.”

Blewitt added that this all ties into the way advisers and firms are operating and “reinvesting” their time savings into the business.

“What they’re doing with that time is they’re focusing more on client goals. They’re enhancing and deepening client relationships and increasingly dealing with a larger number of clients,” he told ifa.

“But the ones that have been doing it longer have higher metrics to their business profile.”