Managed accounts: Shaping the future of advice

The past six months have tested – and proven – the ability of managed accounts to help advisers respond to fast-moving market shifts. And there is no doubt in my mind they have democratised the availability and accessibility of advice. 

These increasingly sophisticated and customisable solutions provide both firms and their clients access to institution-level service and expertise – professionals who can help firms achieve business goals as well as client goals.

I was recently a panellist on the Stockbrokers and Financial Advisers Association (SAFAA) virtual conference session on the topic of ‘managed accounts and platforms: shape of the future’, where we discussed the growing relevance of managed accounts in today’s market. There was general agreement that these responsive, flexible and transparent investment solutions provide the key to shifting the advice conversation away from trading and timing, and towards more holistic conversations about goals.

Recent COVID-triggered market volatility led to significant trade volume spikes for managed accounts. This was consistent across the market. Macquarie saw a week’s worth of trade volume in a single day. Throughout this period, we were able to respond and implement model changes in the same consistent and seamless manner, removing any distraction for advisers. This gave them the confidence they could focus on being available for their clients during a period of great uncertainty and angst.

Advisers using managed accounts were able to quickly and efficiently exit holdings that were seen as risky – consistently, across every client – without having to chase them for authorisation. And advisers could just as easily get into assets that looked promising.

The discussions during our session made me reflect on just how far managed accounts have come – and how they now put advisers in the driver’s seat, steering their clients’ best interest and fiduciary obligations with full control.

From managed portfolios to managed goals

Managed accounts have evolved into an important tool for customer engagement. Over the past few years, as the importance of acting in a client’s best interest has become resoundingly clear, it is equally evident that advisers spend a great deal of time on administrative tasks. These are often things clients don’t really see or value.

These structural requirements are important, but there are other ways to manage such tasks in a compliant and more efficient manner. Especially with the support of a specialist asset manager who can fully focus on optimal portfolio construction and apply it across every single client. When trusted professionals can invest the time required to construct, rebalance and implement portfolios, advisers are freed up to focus on building stronger relationships with their clients. This enables them to not only deliver advice and solutions that meet their needs, but more importantly anticipate those needs – helping to deliver on them faster.

One of the big call-outs from our panel discussion was that time is a finite resource – no matter how much you may be willing to pay, you can’t access more than 24 hours in a day.

So everything advisers do ultimately has a trade-off. They can either direct their time and energy to the ‘no or low value-add tasks’ or look at alternative ways to elevate their service and client engagement proposition – by surrounding themselves with their own circle of ‘trusted advisers’. These product, technology and solution providers can help them take full advantage of scale and efficiency benefits. 

Advisers can then spend more time working on goals with clients – helping them navigate the uncertainty and providing the ‘whole of life’ advice clients seek. By redirecting focus to the things clients really value, this can make every interaction more meaningful.

And it’s never been more important to have that time to understand a client’s objectives, needs and their individual situation. In a period of heightened uncertainty, with the COVID-19 pandemic triggering a recession, clients may naturally be more nervous about the future. About their job security, aging parents, retirement – or their children. They may want access to cash flow they wouldn’t usually need, or their risk appetite may have changed entirely.

These changing needs will see clients increasingly rely on their advisers – not just for financial matters but also broader ‘life matters’.

This changing environment will provide advisers, more than ever before, a real opportunity to shift their role from being decision-makers to decision-shapers across a multitude of areas. And this is where managed accounts present a real opportunity: moving the adviser's role to one of a ‘behavioural coach’. With the investment decision, trading, execution and reporting outsourced (either partially or entirely) to their trusted partners, advisers are freed to better engage and educate their clients. They can help them shift from a fear state to a growth state, and build a genuine partnership to help their clients navigate a myriad of life decisions.

Couple this with the agility, portability, transparency, cost and personalisation benefits managed accounts provide, and it’s easy to see why they are becoming increasingly popular. At its core, the solution’s responsiveness to changing market conditions provides increased scope for advisers to align client’s investment to their changing needs, whether in an SMA portfolio or a core-satellite holding. 

Flexible and robust

To dispel an often-quoted myth, managed accounts won’t replace the need for advisers or brokers, or ever take them away from what they do best. A truly aligned managed account solution elevates the adviser, broker and the practice – it helps them deliver a differentiated and personalised relationship with each client, but in a scalable, efficient and cost-effective manner.

We’ve seen that first hand at Macquarie, from our vast experience in helping firms of all sizes with their managed accounts transition plans. These firms quickly realise just how seamless and efficient the process is and wonder why they hadn’t considered the solution earlier. On average, advisers save around 13 hours per week[1] on portfolio management. They can then use that time to scale their business, or expand their service offering or client book – without compromising on quality.

Importantly, managed accounts are not ‘one size fits all’. They still offer advisers the flexibility to align investment solutions with an individual client’s needs.

Managed account structures can align with environmental, social and corporate governance (ESG)  principles, or take specific tax requirements into account. They can exclude specific assets if there is a conflict. This means they provide the opportunity to personalise a solution like never before.

At Macquarie, that flexibility extends to the way advisers can implement a Separately Managed Account (SMA) structure into their businesses. We don’t dictate a specific approach – advisers can buy a product off the shelf, build their own model leveraging in-house capabilities, or outsource the investment management under a partnership model. Regardless of the approach, we bring the expertise to support them, and their clients, in an ever-changing environment. 

But this flexibility needs to sit within a robust investment framework – and the recent market response to COVID-19 really emphasised this need. The SAFAA panel discussed the idea of ‘execution alpha’ – the difference good investment execution makes to performance. To me, this is a fundamental obligation – but it also should not come at a cost.

‘Best execution’ is not just speed to market to push through volume trades. It’s about balancing timely implementation with the associated transaction fees, and leveraging that real deep human experience that comes from a well-resourced and experienced trading team.  

The best execution is deliberate and considered, and that is what gives advisers confidence they will not only get a consistent outcome for clients, but they will do so in a cost-effective manner. Macquarie doesn’t balance its models daily, or each time there is an outflow or inflow. All trading, rebalancing and implementation is done in a considered way – avoiding unnecessary transaction and other costs for clients.

The value of our product and trading teams’ expertise was evident during the recent market turbulence. You simply can’t replicate that human element; the value of personal interactions, and ultimately the confidence this provides investment managers and advisers.

Using data to strengthen relationships

With Australia’s managed accounts market still in relative infancy, we believe its future is still very promising – and we are investing in increasingly sophisticated platforms and technology to support client demand.

As a pioneer in managed accounts, Macquarie is still strategically focused on this solution. Human Centred Design principles guide every product decision. Clients are ultimately where we start the managed account discussion, and where we end it. Every feature, every enhancement is client-centric. And that underpins the transparency, choice and flexibility within our structures. We don’t second guess the needs of investment managers, advisers or clients – which is why we continue to expand an already extensive suite of over 220 models and 45 managers.

We are already seeing the potential for technology and solutions to be far more integrated within an adviser’s business, providing a rich source of data at their fingertips. And that data is invaluable, because it allows advisers to more proactively anticipate and respond to market shifts, changing client needs and even regulatory change. 

In this way, managed accounts continue to give advisers opportunities to elevate client engagement – and strengthen the bond between clients and advisers to ultimately help them both thrive in an ever-changing environment.  

Macquarie Wrap provides access to over 220 SMA models across more than 45 investment managers. If you’d like to learn more, please get in touch to speak with a specialist.