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More than half of advisers utilising managed accounts

A new report has revealed an upward trend in managed accounts being used, with funds under management close to $200 billion.

The 15th annual SPDR ETFs/Investment Trends Managed Accounts Report, jointly released by State Street Global Advisors and Investment Trends, revealed the increased use of managed accounts among financial advisers, driven primarily by the need to increase efficiency.

Reaching a record high, the report found that 56 per cent of advisers are now using managed funds, more than tripling in a decade from 18 per cent. It also noted that 19 per cent of advisers were “potential users” of managed accounts, which could take the reach to 75 per cent in coming years.

Additionally, it found that a record high of 25 per cent of all new client inflows was now being placed into managed accounts. Breaking another record, funds under management (FUM) in managed accounts has reached $194.85 billion, an increase of 146 per cent over the last five years.

Sinead Schaffer, vice-president and ETF portfolio strategist at State Street Global Advisors, said the increase can be primarily attributed to advisers’ need to work more efficiently as the falling number of advisers continues to put pressure on the industry.

“Fifty-nine per cent of advisers cite ‘freeing up their time’ as one of the main upsides of using managed accounts with advisers now reporting they, or their support staff, save on average 22.8 hours per week, up from 17.1 hours last year,” Schaffer said.

“For an adviser who works 7.5 hours a day, that’s a saving of three days per week. This allows them to focus on value-added work that increases their customer value proposition to existing and new clients.”


Noting other factors driving advisers towards managed accounts, she said performance, fees, availability on their main investment platform, reputation of the asset manager, and asset class exposure contributed to their increased popularity.

According to the report, advisers utilising managed accounts allocated close to two-thirds, 64 per cent, of clients’ total assets into a managed account, with multi-asset class being the most commonly used, 68 per cent.

Schaffer added that managed accounts are becoming an essential part of advisers’ portfolios, playing a principal role in the investment strategy for clients with a lower balance.

“As expected, more advisers are using these structures for lower balance clients, with 40 per cent of existing managed account advisers believing it’s appropriate to hold the majority of assets in a managed account for clients with balances less than $100,000, up from 33 per cent the previous year,” she said.

“Financial advisers mainly use managed accounts as a core, long-term portfolio allocation solution, dedicating 60 per cent of new client money to core investments, 55 per cent of that core to managed accounts and they plan to keep the investment for an average of 7.8 years.”

Eric Blewitt, chief executive officer at Investment Trends, said the financial status of the client impacted the likelihood of an adviser utilising managed accounts as part of their investment strategy.

“Affluent clients with funds between $250,000 and $1 million are the most popular segment that advisers believe should use managed accounts for the majority of their portfolio,” Blewitt said.

“That is followed by clients with balances between $100,000 and $250,000, those with less than $100,000 and finally, high-net-worth clients with more than $1 million to invest.”