Record Number of Financial Advisers Switching to Managed Accounts

SYDNEY, 3 April 2023: – State Street Global Advisors, the asset management business of State Street Corporation (NYSE: STT) together with Investment Trends, today issued a new report showing the proportion of financial advisers using managed accounts has more than tripled from 17% a decade ago to a record high of 56% now.

And a further 22% of advisers are potential users, taking the total possible reach in coming years to 78%, making managed accounts the pre-eminent solution for financial advisers.
This helps explain why assets under management in managed accounts have surged 200% in five years to exceed $144.5 billion¹.

The 14th SPDR ETFs / Investment Trends Managed Accounts Report finds that amid global inflationary pressures, rising interest rates, extreme market volatility and geopolitical tensions caused by the Russia-Ukrainian War, adoption of managed accounts is now more popular than ever.

State Street Global Advisors’ Vice President and ETF Model Portfolio Strategist, Sinead Schaffer, said the strong and sustained adoption of managed accounts was a reflection of their ability to support advisers’ holistic approach to financial planning.

“Advisers using managed accounts direct 41% of new client flows into them, a four-fold increase from 10% a decade ago.

“In addition, managed account users allocate, on average, 76% of their clients’ total investable assets into managed accounts.”

“The research also shows that multi-asset class models are the most commonly used managed account, comprising almost three quarters of recommended models,” she said.
Mrs Schaffer said advisers indicated that ETFs, direct shares, and managed funds were the most popular products in managed account portfolios over the past year.

“Sixty-three per cent of current managed account users use ETFs as their underlying products,” she said.

“Further, a third of potential managed account users would like to see more ETFs as the underlying products within managed accounts.”

Investment Trends Advisory Board Chair, Sarah Brennan, said that advisers cited many benefits of using managed accounts including time savings and the reduced risk and compliance for their practice. Additionally, the ability to achieve full asset allocation is a key prompt to start using them.

“One of the key managed accounts segments is clients with investible assets of between $250,000 and $1 million,” Ms Brennan said.

“Two in five current managed account users indicated that clients aged 35-49 are appropriate to hold the majority (e.g. over 75%) of their portfolio in managed accounts and over a quarter indicated managed accounts are appropriate to hold the majority (e.g. over 75%) of the portfolio for SMSF clients”.

“Whilst performance and fees remain important factors for advisers when recommending managed accounts to their clients, these considerations are becoming less important as time goes on.”

“Factors such as availability on investment platform, then the reputation of the asset manager, are becoming more prevalent.”

“Those that have used managed accounts for four years or more, have larger average client inflows and larger average client FUA balances, when compared to the more recent users of managed accounts. One could infer this is a result of these structures” Mrs Schaffer said.
“Sixty-three 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 17.1 hours on average in a typical work week.”

Ms Brennan said managed accounts were proving remarkably resilient to seismic global economic and political shocks.

“The report found that 41% of financial advisers believe the current economic conditions and geopolitical events have had ‘no impact at all’ on their use of managed accounts. ” she said.

Other key findings:

• Separately Managed Accounts (SMAs) on platform remain the most widely used structure to implement managed accounts, with 86% of advisers implementing managed accounts with an SMA on platform.
• 57% of advisers compare fees to ensure managed accounts recommended to clients meet best interest requirements. A further, 45% use research ratings and 43% evaluate performance.
• Advisers noted a change to their value proposition when using managed accounts, 45% noted they have greater focus on client goals and 39% specified their value proposition changed to outsource portfolio construction to professionals.
• Over half (60%) of managed account users implement responsible / environmental, social and governance (ESG) investing with managed accounts. A quarter of advisers implement this with dedicated portfolio consisting solely of investments with high ESG ratings.

State Street Global Advisors officially launched its ETF Model Portfolio capability to the Australian market in 2019, through various intermediaries. It now ranks among the top 20 most used investment managers by advisers who currently use managed accounts. The 14th edition of the SPDR ETFs / Investment Trends Managed Accounts Report was conducted by Investment Trends via an online quantitative survey of 632 Australian-based financial advisers between November 2022 and January 2023.