Our latest proprietary global research, Model Portfolio Solutions and the Client, conducted by the SPDR Global Practice Management team showed on average, planners are spending more time on portfolio management (23.1%) than client-facing activities (14.7%) or prospecting new clients (11.3%). The time spent on these activities does not reflect the priorities identified by planners such as deepening relationships with existing clients and acquiring more clients.
With a saving of up to 13 hours per week, financial planners are using this extra time to focus what matters most: supporting client goals, engage clients more frequently, and to service a larger client base. Advice practices with five or more planners tend to benefit the most from managed accounts with respect to time saved.
This time saving enables financial planners to transition to financial coaches. This has never been more important than during volatile markets, with time spent communicating portfolio changes to clients reduced on average by 84 minutes (67 minutes for a planner using managed accounts vs 151 minutes for the average planner). Investment administration work is also halved for managed accounts users (from 229 minutes to 119 minutes).
Another beneficiary of time gained is the practice, with financial planners using the additional time to focus on marketing to attract new clients (33% cite this) and developing a business strategy (29%).
Encouragingly, the longer managed accounts are implemented in a planners practice, the greater the potential time savings – after 2 years of usage, financial planners saved up to 4 extra hours per week compared to their initial year of use.
Managed Account Used Across All Client Demographics
Managed accounts are not just for the wealthy. More than a third of managed account users believe that these structures are suitable for lower balance clients with less than $100,000 in investable assets, while 30% say they are appropriate for millennials. Financial Planners who use SMAs are more likely to cite managed accounts as appropriate for lower balance and millennial clients – a trend that is set to grow if platform fees and minimum investment requirements continue to decrease.
Across the spectrum of age and wealth, financial planners most often consider managed accounts to be suitable for their accumulator clients between the age of 35 to 49 (42% cite this) and affluent clients with investable assets of $250,000 to $1 million (63%). Furthermore, 45% of users also believe managed accounts are also appropriate for their high net worth clients with investable assets in excess of $1 million.
Greater Diversification Requested in Investments
The Investment Trends survey shows ETFs are increasingly preferred as a cost-effective way of achieving index (non-active) returns across a range of asset classes, with 68% of users preferring to hold ETFs within a managed account.
When looking at the broader investment mix, 56% of financial planners are currently recommending multi manager or multi asset managed accounts. Furthermore, 85% access managed accounts via an SMA.
For lower balanced clients, one third of users prefer two to five investment managers within these multi asset solutions. For their high net worth clients, there is greater preference to have 10 or more managers, suggesting more complex managed accounts tend to be preferred.
What Does the Future Hold?
Managed accounts continue to gain popularity both locally and abroad. Early adopters such as the United States have already amassed US $6.8 Trillion in model portfolio assets.2 With the time savings from using managed accounts, financial planners can focus more on engaging with their clients, acquiring new clients and developing their practice. We expect more and more planners to transition to managed accounts, especially as clients become familiar with this investment vehicle and continued product prefiltration.