Beyond 2023: The next 10 years of managed accounts

By Jayson Forrest - Managing Editor  - IMAP Perspectives

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As managed accounts continue to grow rapidly, speakers at the IMAP Specialist Webinar Series on ‘Transforming advice into wealth management’ reveal their thoughts on how their businesses are preparing for the next 10 years and beyond.

 With the removal of financial stimulus programs, ongoing geopolitical tensions and instability, rising interest rates and inflation, there’s little doubt that the next 10 years in investment markets will be very different to the last 10 years.

It’s a view supported by Scott Fletcher - Chief Investment Officer at Woodbury Financial Services - who confirms that under the current economic and political landscape, Woodbury has needed to adjust its pro growth exposure in portfolios. He believes it is a good time to pull back on large regional positions and large style factor exposures of pro value and pro growth.

“The way these styles and types of exposures are currently moving around and swapping in a very volatile environment, would suggest that the monetary, growth and earnings cycles are deteriorating,” Scott says. “So, while I wouldn’t suggest advisers or managers exit these types of exposures entirely, I would recommend they pull in their exposures. That’s because now is not the time to be taking extreme risks in portfolios with asset allocation or exposures.”

It’s a similar story at JB Were, where Andrew Tracey - Head of Discretionary, Markets and Managed Accounts - confirms that recently, from a Strategic Asset Allocation (SAA) perspective, JB Were has reduced its growth exposure and increased its defensive asset exposure.

“About 18 months ago, we moved away from Government bonds. But since then, interest rates have started to bounce back up, so we have put Government bonds back into our portfolios as a defensive measure, because they are offering an attractive yield now,” Andrew says.

However, he adds that JB Were remains pragmatic under the current market conditions, making the business more cautious now than at any time since the COVID drawdown in early 2020.

“If you look at global recession modelling, there’s a 15-20 per cent chance of a recession at anytime. And we believe the risk of recessions increases to about 35 per cent in the back half of 2023 and 2024. So, we want to be a little bit conservative with our portfolios, hence our current portfolio positioning.”

Andrew Tracey is Head of Discretionary, Markets and Managed Accounts at JB Were;
Andrew Tracey - JB Were
Matthew Swieconek  Managing Partner, Wealth Management at Findex.
Matthew Swieconek - Findex
Matthew Walker is Managing Director at Dynamic Asset Management
Matthew Walker - Dynamic Asset Management
Michael Rees-Evans is Director, Wealth Advisory at William Buck
Michael Rees-Evans
Paul Forbes - Chief Executive Officer at Australian Advice Network
Paul Forbes - Australian Advice Network
Piers Bolger is Chief Investment Officer at Infinity Asset Management/Viridian Financial Group
Piers Bolger - Inifinity Asset Management

In terms of efficiency, there is going to be enormous growth in the managed accounts space. We’ve seen a lot of innovation over the last 10-15 years, so you can only image what the next 10 years is going to look like for our business and the industry. Change and innovation is exponential, which will only be a good thing for managed accounts

Matthew Swieconek

Core competency

At Dynamic Asset Management - a goals-based portfolio manager - the business isn’t planning to do anything differently to its business model over the next 10 years, according to its Managing Director, Matthew Walker.

“We’ve all seen the growth of managed accounts. This solution is currently the most effective and easiest way to scale your advice business, while managing client money consistently across the board. So, we’ll be staying with managed accounts,” says Matthew.

However, he does acknowledge there are significant challenges on the horizon for advice businesses. One of these challenges is a practice’s investment philosophy, including who is actually responsible for managing the money.

“Over the last 10 years, interest rates have fallen and it’s been relatively easy with SAA. But moving forward, you need to be more dynamic, active and selective with your investing. This means you need the right people who can manage the money more proactively, whether that’s asset consultants, your investment committee, or portfolio managers. This means you need more resources,” he says.

Matthew acknowledges that although it’s easy to scale the advice side with managed accounts, managing the money is going to get increasingly harder. This means advice businesses will need to increase their resources, particularly in areas like research and portfolio management. And while investment committees are great from an oversight and compliance perspective, he adds they’re not necessarily the best portfolio managers.

“So, I think we’re going to see advisers choose between being a strategic financial adviser, with that being their core competency, or becoming investment managers. I think advisers who believe they can do both, will find it increasingly challenging going forward,” he says.

“That’s because the typical adviser spends 7-10 per cent of their time managing investment portfolios and doing research. The rest of the time is spent doing financial planning and operating the business. It’s therefore very difficult to suggest that a financial adviser can spend 10 per cent of their time managing investment portfolios and hope to outperform a highly resourced full-time professional manager.”

Michael Rees-Evans - Director, Wealth Advisory at William Buck - shares Matthews views, adding that a challenge for advice firms is having somebody within the business who is the operational bridge between the investment committee and the advisers.

“The issue is how do you keep your investment management on-track and consistent across your client base,” says Michael. “Who is making sure that clients with a cash deposit are rebalanced or invested out of the normal cycle? So, going forward, I believe it’s important to have somebody in charge of the investment operations and who can implement the decisions that come from the investment committee.”

Clearly, clients, advisers and advice businesses see the value in the managed accounts framework. So, I would like to see platforms evolve at a faster rate than what they have to date, and not hold back with innovation.”

Piers Bolger

We’ve all seen the growth of managed accounts. This solution is currently the most effective and easiest way to scale your advice business, while managing client money consistently across the board. So, we’ll be staying with managed accounts”

Matthew Walker

Change and innovation

For Matthew Swieconek - Managing Partner, Wealth Management at Findex - the next 10 years is all about Findex refining its processes. He believes there will be a lot of evolution in the platform space, as well as product innovation.

“In terms of efficiency, there is going to be enormous growth in the managed accounts space,” he says. “We’ve seen a lot of innovation over the last 10-15 years, so you can only image what the next 10 years is going to look like for our business and the industry. Change and innovation is exponential, which will only be a good thing for managed accounts.”

As a business, Findex continues to swim against the tide. As many institutional licensees disappear, Findex continues to grow significantly.

“We firmly believe we’re in a ‘sweetspot’,” says Matthew. “Unfortunately, we’ve had a lot of large institutions exit the advice space, which has further increased the number of unadvised Australians. However, over the coming years, we believe we will be the prime beneficiary of this structural change that is taking place in the market.”

It’s a similar sentiment shared by the Chief Investment Officer at Infinity Asset Management/Viridian Financial Group, Piers Bolger.

“Our view is the industry will continue to grow. Over the last couple of years, the managed accounts sector has grown from $60 billion to $130 billion, and will probably be in excess of $200 billion by the end of 2022 or early the following year.

“Clearly, clients, advisers and advice businesses see the value in the managed accounts framework. So, I would like to see platforms evolve at a faster rate than what they have to date, and not hold back with innovation. But I do believe that will naturally occur, given the fact that managed accounts is the fastest growing component of their offering.”

Concerning the size of advice businesses, Piers confirms Viridian has looked closely at this, pointing to the aggregation of industry super funds.

“Our view is that it’s going to be increasingly challenging for smaller practices and individual self-licensed advisers to operate in a meaningful, profitable and sustainable way in the future.”

Piers also believes the investment market will also change in respect to the opportunities that can be delivered to clients through managed accounts. “From our perspective, that’s very exciting, particularly when working with external partners around how we can deliver those opportunities.”

About

Scott Fletcher is Chief Investment Officer at Woodbury Financial Services;

Andrew Tracey is Head of Discretionary, Markets and Managed Accounts at JB Were;

Matthew Walker is Managing Director at Dynamic Asset Management;

Michael Rees-Evans is Director, Wealth Advisory at William Buck;

Piers Bolger is Chief Investment Officer at Infinity Asset Management/Viridian Financial Group, and

Matthew Swieconek is Managing Partner, Wealth Management at Findex.

This IMAP Specialist Webinar Series- ‘Transforming advice into wealth management’ - was moderated by Paul Forbes, Chief Executive Officer at Australian Advice Network.

The recordings of all 3 webianrs in this Specialist Webinar Series: Transforming Advice into Wealth Management can be viewed using the links below on IMAP's YouTube Channel

Session 1: 23rd May 2022 Serving HNW Clients

Andrew Tracy, JB Were and Scott Fletcher, Woodbury

View session 1 recording


Session 2: 25th May 2022 Developing Wealth Management from an Accountancy Base

Matthew Walker, Dynamic Asset and Michael Rees-Evans, William Buck

View session 2 recording

Session 3: 27th May 2022 The Strategic role of Wealth Management in a diversified financial services business 

Matthew Swieconek, Findex and Piers Bolger, Viridian Advisory/Infinity Asset Management

View session 3 recording


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