A strong and differentiated client proposition is fundamental to financial advice success
The role of financial advisers is undergoing a profound shift, from technical specialist to relationship-driven coach covering broader strategic advice. To make this transition at scale successfully, advisers need a robust suite of digital tools—with managed accounts an increasingly important part of the toolkit.
At the height of market volatility in 2020, Macquarie saw prolonged trade volumes over a number of weeks. For many financial advisers, it was a true test of the managed accounts model. Those using managed accounts could quickly adjust strategies—across hundreds of clients simultaneously—without having to chase authorisation or choose who would benefit first. Advisers could also easily invest in new opportunities as they emerged, and had more time to be available for clients during a period of great uncertainty.
From a client’s point of view, this ability to respond was more or less assumed. Salesforce’s State of the Connected Customer report of October 2020 found that client expectations of technology use have accelerated, especially after experiencing new standards of digital service throughout the pandemic. This report and Macquarie’s Propensity Project research have found that for some time, client satisfaction has been largely driven by proactive management of their portfolio to achieve the best risk-return outcomes
As a streamlined investment implementation tool, managed accounts have evolved to become essential technology for financial advisers. It gives them the opportunity to resolve two underlying tensions for a growing advice business, namely to:
- sustain consistent client outcomes and experiences across a large volume of accounts
- enable deep relationships at scale.
This paper explores how managed accounts can support a strong and differentiated client value proposition for financial advice firms—with benefits for clients and the business from day one.
From managed portfolios to managed goals
The use of managed accounts accelerated in 2020, with the proportion of financial planners using them for client investments doubling since 2016.
A joint State Street Global Advisors (SSGA)-Investment Trends 2021 Managed Accounts Report found that, based on a survey conducted from December 2020 to February 2021, of those who used managed accounts, 83% said it has strengthened their client value proposition, and 81% believed it was easier to demonstrate client best interests duty than with direct shares or managed funds.
The report also included the following findings regarding how users’ client value proposition had changed as a result of adopting managed accounts:
- Greater focus on client financial and lifestyle goals: 39%
- Outsourcing portfolio construction to professionals: 36%
- Greater focus on educating clients as a financial mentor: 35%
- Distanced value proposition from investment returns: 29%
- Greater transparency: 38%
- Cost-effective investing: 32%
- More communications/improved availability: 26%
- Tax-effective investing: 18%
- Service more tailored to individual client needs: 27%
- Providing a broader range of products and services: 23%
- Other: 30%
- N/A, no change: 15%
Macquarie’s Virtual Adviser Network research into high-performing advice firms identified that clients perceive their experience with any business through three lenses: success, effort and emotion. Can they achieve the outcome they want, how easy is it to do so, and how does it make them feel? With greater visibility over their holdings, managed accounts can make investors feel confident and reassured. Further, by freeing up adviser time and reducing the Record of Advice (RoA) paperwork requirements on both advisers and clients, it is simpler to achieve the right investment outcomes.
“We see managed accounts deliver superior portfolio outcomes for the majority of clients—consistently—over three to four years and beyond,” Vincent O’Neill, chief executive of Stanford Brown said.
His firm began using managed accounts four years ago, and recently added Stanford Brown’s separately managed accounts (SMAs) to the Macquarie Wrap platform to provide greater choice and flexibility to clients.
“I think in our industry there is a misconception that technology like robo-advice is a threat,” O’Neill explained. “But we see technology—including managed accounts—as the perfect complement to our high-touch, high-engagement model. It’s a way to deliver a superior service more efficiently, while also managing the compliance for rebalancing portfolios.”
Let us take a closer look at how managed accounts help similar firms provide an experience defined by both consistency and customisation, at scale.