SYDNEY, 21 March 2022: State Street Global Advisors, the asset management business of State Street Corporation (NYSE: STT) together with Investment Trends, today issued a new report revealing more financial advisers are turning to institutional-style investment vehicles to better manage client funds during market volatility.
The latest SPDR ETFs / Investment Trends Managed Accounts Report shows that amid ongoing geopolitical tensions, soaring energy prices, rising inflationary pressures and extreme market volatility, a record number of financial advisers are using managed accounts to implement client solutions.
According to the research, more than half (53 per cent) of financial advisers are using managed accounts, up from just 16 per cent a decade ago.
Advisers who already use managed accounts are now recommending them for 60 per cent of their clients, up from 44 per cent in 2021. Prior to COVID-19, advisers were recommending managed accounts to one third of their clients or 33 per cent (2019).
State Street Global Advisors Head of SPDR ETFs Australia & Model Portfolios for EMEA and APAC Kathleen Gallagher said outsourcing some aspects of investment management can help free up advisers to spend more time with clients, focusing on objectives and guiding them through market movements.
“Advisers are telling us they like to use managed accounts because they provide access to institutional-grade investment management, efficiencies of scale, and more scope to focus on educating their clients and meeting client goals,” Ms Gallagher said.
“Almost half of advisers who outsource investment management through managed accounts also said it reduced their operational risk. This is because managed accounts are typically used across multiple clients. Instead of having to manage individual investment portfolios, advisers can streamline their advice and investment management processes. Less intervention on a client-by-client basis reduces the probability of something going wrong at the individual trade level,” she said.
In Australia, managed accounts have now crossed the $100 billion milestone of funds under management, with the latest numbers showing they reached $131.6 billion as of 31 December 2021.1
Currently, 20 per cent of client funds are invested into managed accounts, up from just 4 per cent in 2015. This is expected to rise to 25 percent by 2025, over and above flows into direct shares and Listed Investment Companies.
Investment Trends Chief Executive Officer Sarah Brennan said the popularity of managed accounts was being driven in part because advisers are now seeing the benefits for a broader investor demographic.
“Part of the growth in managed accounts comes down to their growing suitability as a whole-of-portfolio solution for lower balanced clients (less than $100k) and High Net Worth clients with more than $1m in investable assets,” Ms Brennan said.
“What’s more, a third of managed account users say these structures are appropriate for millennials (aged under 35) and self-managed super funds (SMSFs).
"When it comes to implementing responsible investing solutions, the vast majority, or 76 per cent, of advisers prefer to do so within a managed accounts structure, suggesting they trust that ESG themes are best managed by professional investment managers,” she said.
The next wave of users believe managed accounts are most appropriate as a whole-of-portfolio solutions for affluent clients with between $250k and $1m in investable assets.
“While these structures continue to grow in popularity, the industry has some work to do to provide advisers with more educational tools they can share with their clients,” Ms Brennan said.
Separately Managed Accounts (SMAs) are the most popular, with more than 80 per cent of advisers saying they implement managed accounts via this structure. And close to 50 per cent of current managed accounts users recommend multi-asset class models.
State Street Global Advisors launched its ETF Model Portfolio offering to the Australian market in 2019. It now ranks among the top 20 most used investment managers by planners who currently use managed accounts.
The 13th edition of the SPDR ETFs / Investment Trends Managed Accounts Report was conducted by Investment Trends via an online quantitative survey for 669 Australian-based financial advisers. It took place between December 2021 and January 2022.
1Source: Institute of Managed Account Professionals (IMAP) and Milliman, as of 31 December 2021.
Managed account is the general term that refers to the type of product or service where the underlying assets are owned by the investor but are managed or advised by a professional investment manager. Typically, Australian investors access model portfolios via managed accounts. Where the model portfolio is a collection of assets continually managed by wealth managers. Model portfolios employ a diversified investment approach to target a particular balance of return and risk or portfolio objective.
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