Lonsec acquiring licensee portfolios in bid to reduce conflicts

Research house and managed account provider Lonsec will work with financial advisers seeking to transition from conflicted advice models and introduce a greater degree of independence in their investment decisions.

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By James Mitchell - May 07, 2019 4 comments

Lonsec is offering to acquire in-house managed portfolios from advice licensees to enable them to take advantage of "best practice governance principles and Lonsec’s experienced team of portfolio construction experts", the group said in a statement today.

With a shift currently taking place in the advice industry in the wake of the royal commission, Lonsec said advisers are acutely aware of the need to present a professional, conflict-free advice environment for their clients.

“Advice models have come under a great deal of scrutiny by the royal commission as well as the regulators and the community,” Lonsec CEO Charlie Haynes said.

“The royal commission may have stopped short of a ban on vertically integrated or conflicted financial advice, but advisers know they need to start moving quickly in this direction to meet community expectations.”

While it is becoming increasingly unpalatable for licensees or advisers to charge portfolio management fees for in-house managed accounts, Lonsec said advisers are also cognisant of regulatory developments.

An empowered ASIC is investigating how platform providers ensure the integrity of managed accounts constructed by advice licensees who might lack the expertise or resources to act as specialist investment managers.

For many advisers, the question is how best to manage conflicts, either by outsourcing the portfolio construction process or introducing a greater degree of independence in their investment decisions.

Lonsec is proposing to acquire the investment management rights from existing managed account providers, enabling them to focus on the provision of advice without conflict.

"Licensees have the flexibility to retain their existing branding, investment mandate and platform, or transition to Lonsec’s own professionally managed portfolios incorporating best ideas and insights from Australia’s leading investment product research house," Mr Haynes said.

“An outsourced managed account solution is becoming increasingly popular, not just in order to reduce conflicts but to allow advisers to focus on their clients’ needs and aspirations while leaving the investment process to specialised portfolio managers."