The managed accounts revolution

The managed accounts segment is on the cusp of a revolution.

The $60 billion already invested in managed accounts is forecast to grow at 40% a year for at least the next two years, taking the managed account industry to more than $115 billion by 2020, according to the industry association IMAP [1].

Managed portfolio providers are moving quickly to meet this increasing demand, found a new white paper, The Future of Managed Portfolios, from HUB24 with research from CoreData.

The whitepaper, based on interviews with industry leaders, foresees managed accounts entering a new phase in their evolution – refining offerings and enabling flexibility in design and construction that was previously available to only the very largest investors.

Commenting on the research, HUB24 Managing Director, Andrew Alcock, says: “This rapid increase in growth will be due to technology that supports financial advisers’ delivery of even more sophisticated and tailored solutions, while at the same time continuing to deliver significant cost benefits and revenue opportunities for advice practices.”

The report, however, cautions advisers against making the mistake of thinking all managed portfolio solutions are equally innovative.

The establishment of specialised managed portfolio providers has spurred competition and been a primary driver of improved user experience across the sector. The adoption of adaptable technology has underpinned this increased competition to produce better outcomes for clients and advisers alike.  But technology is advancing rapidly, and a solution designed and implemented today can quickly date, becoming an impediment to achieving a client’s long-term objectives.

“Not all managed portfolio solutions are created equal and this assumption could see advisers backing the wrong horse in the technology race – and have significant implications for an advice business and its clients further down the track,” it found.

Advisers need to have confidence the managed portfolio provider they partner with is committed to investing for the long-term.  An adviser’s relationship with a client may conceivably last several decades, and advisers need to know a managed portfolio provider is committed to investing in the systems and technologies needed to ensure their offering remains efficient and constantly focused on improving client outcomes.

Whilst the choice of provider depends on satisfying specific client best interests, all things being equal the risks of choosing a provider that does not have broad offer and enhanced functionality can result in the advice business having to move clients, reducing business efficiency and delivering substandard outcomes for some. Not to mention the disruption caused if forced to move clients from one platform to another, and the possible CGT consequences.

Ben Moore, Vice President of National Sales, Alliance Bernstein noted “Moving platform providers is no easy task and can take the focus and time of the advice practice away from seeing clients while they undertake such a transition.  This is why advisers and licensees do a lot of work at the due diligence stage in choosing their platform provider, with a view to having a long-term – 10 year or more – relationship.  Platforms that can demonstrate technology that adapts to change and offer transition support and training not just to advisers, but support staff as well will win in this space”.

While the number of players in the managed portfolios space may proliferate in coming years, not all will be created equal, and many offers have only the basic functionality available.  Those that prosper, and support advisers and their clients will be those with a proven track record, a proven ability to remain responsive to clients’ and advisers’ needs, and a constant drive to deliver new features and solutions.

Want to know more? Access the full whitepaper The Future of Managed Portfolios click here.

[1] According to data from the Institute of Managed Accounts Professionals (IMAP).