Managed account offerings lagging on alternative investment consensus

Managed accounts have enjoyed a steady upward trajectory for the last decade, with 60 per cent of advisers in Australia now using them.

On average, advisers using managed account platforms are allocating around 70 per cent of client assets into these accounts, taking advantage of efficiency gains and business scaling capabilities offered through the model.

However, many within the industry have highlighted the limited offerings of alternative investment options within managed accounts, stating it lags behind industry appetite.

“At the moment, the platforms are only really solving for liquid alternatives, which has got daily pricing. I think the industry’s probably got a little way to go to solving semi-liquid alts and how you could cater for longer lock-up alternatives,” Matt Walsh, general manager of distribution at Praemium, said on an ifa Live webcast this week.

“There are a couple of things that the platforms need to solve for. Part of it is technology, and the other part is the trustee overlay.

“I think we have got a little bit of work to go from there.”

Client interest has also increased, in particular from high-net-worth clients looking to diversify their assets.

“We are definitely seeing a lot more demand from clients asking questions about alternatives. And that is all coming from their desire to look for even more diversification [in their portfolios],” said Kathleen Gallagher, head of EFT model portfolio solutions EMEA and APAC at State Street.

“It’s about delivering it in a way in which it can work with the adviser practices who are still looking to deliver an end solution that can deliver the additional diversification high yield [alternative assets offer].”

Speaking from an adviser’s perspective on the webcast, Centaur Financial CEO Hugh Robertson highlighted some of the reasons why advisers are wanting better alternative investment options in managed accounts.

“The alternative assets conversation is really around how we can continue to diversify away from public markets and the volatility that we see in that space,” Robertson said.

He also highlighted how currently, advisers are often limited to allocating funds to satellite accounts, away from the managed account: “It goes back to efficiency, if it [alternative assets] was in a managed account, it would be nice.”

Speaking to The ifa Show last month, executive chairman of Viola Private Wealth Charlie Viola shared the sentiment that better access to alternative investments is needed.

“There’s only so many CBA and BHP shares that you want to own,” Viola said at the time.

“As a result, we wanted to make sure that we were giving clients access to different types of investments, generating their returns in different ways and making sure we were generating revenue for clients especially through the cycle.”

You can catch the replay of the webcast here.