A game-changer for financial advisers

What if the most arduous admin task you had to face when managing/updating your clients’ portfolio was to click on “send”?

What if all your selections and fund changes happened in real time and all your clients were notified instantaneously without any paperwork? What if, in this scenario, all of your risk was fully managed and transparency was a given for your clients. Imagine what you could achieve in your business every day.

Of all the concerns I hear from advisers, the one common response to navigating today’s shifting landscape that is repeated again and again is ‘overwhelmed’. Overwhelmed by regulation. Overwhelmed by products. Overwhelmed by complexity. And overwhelmed by a lack of time to sort through it all and focus on what is every practice’s most pressing priority: looking after clients.

As the demands for our attention multiply, the demand for control is growing louder.

This is where the new wave of managed accounts is making a very timely arrival. It is, we believe, a disruptor to traditional portfolio implementation (and management) as this new technology removes old obstacles for licensees and advisers to more efficiently execute portfolio changes for clients.

In the last three decades, the advice industry has seen a fundamental change in how it delivers its investment solutions. It’s clear though that the endless regulation and complexity following the GFC has meant that many benefits from this evolution have been eroded.

Higher compliance and administration demands tied in with greater outcomes-based performance expectations have upped the game on the delivery of new product solutions. They have been endless. In the early nineties it was about investment funds; in the mid-nineties, we had master funds and in the early noughties it was about wraps. Today it’s about managed accounts. But are they really that different to what we’ve seen before?

At CFS, we believe the current evolution of managed accounts presents a very different scenario. Potentially a game changer for the platform market and the wider advice industry.

For anyone looking at the managed account phenomena for the first time you could mistakenly see them as separately managed accounts – that is, the 20-stock style direct equity portfolio. In our view, while this is certainly a key component of the trend, the real game changer is the managed accounts technology that acts as an engine room, allowing licensees and advisers to make instantaneous changes across model portfolios with the touch of a button and without the need for RoA’s.

Managed accounts have been around for 20 years but this time the new managed accounts are specifically tailored to the modern adviser and the demands they are facing.

What were once investment products have now evolved into all-encompassing investment solutions that are transforming licensee and adviser back offices. And they will be in greater and greater demand: Morgan Stanley reported last year that it believed growth in managed accounts was now at a tipping point and forecasted funds under management to grow by $60 billion by 2020.

And more recently, the Institute of Managed Account Professionals (IMAP) FUM census reported an increase in managed account FUM of $8.3 billion over the six months to December 2016.

Today, managed accounts are moving away from being a singular product to an advice solution that can drive a licensee’s and adviser’s entire value proposition. They can ease the compliance burden by reducing the need to produce records of advice (ROAs) when implementing client investment strategies. They can also help businesses manage risk by ensuring all advisers within a licensee are implementing the same centralised model portfolio across the practice. And they can offer clients true transparency over their investment holdings.

The biggest advantage, however, that we can see from today’s managed accounts is the time saved by implementing such a solution. That’s time that can be invested back into your business by allowing you to meet more new clients and time to deliver better service to existing ones.

Today’s managed accounts are not a product but rather a whole-of-business solution that enables greater practice efficiency and risk management for advisers, with more transparency, and ultimately a more professional and smoother experience for clients.

Matt Harrison is the general manager of distribution at Colonial First State