Managed accounts pass the Best Interest test, while delivering efficiencies to advice businesses during the global pandemic.

Over the last five years, the number of financial advisers recommending managed accounts has doubled from 22 per cent to 44 per cent, with a further 26 per cent thinking of adding this investment solution to their advice offering. These were some of the key findings from the Investment Trends 2021 Managed Accounts Report.

The 12th annual edition of the report reveals a growing adoption of managed accounts by advisers, with the COVID-19 pandemic acting as an accelerant for take-up rates, according to the Head of Research at Investment Trends, Irene Guiamatsia.

“Uptake of managed accounts had steadily crept up since 2012, and managed accounts are fast becoming a mainstream solution for Australian financial advisers,” she says.

According to Guiamatsia, several elements were contributing to the rising popularity of managed accounts, and chief among these was alleviating the compliance burden for advisers.

“Compliance is the top challenge faced by financial advisers in the day-to-day running of their business, with direct implications for profit margins. The ability of managed accounts to alleviate these issues has certainly contributed to their rising adoption,” says Guiamatsia.

As an example, Investment Trends asked current users to compare managed accounts to a portfolio of direct shares or managed funds, and then evaluate their satisfaction with each in relation to the ease in demonstrating client best interest obligations. The findings revealed that almost all users rated managed accounts as being ‘good’ or ‘very good’ (91 per cent), which was well ahead of a portfolio of managed funds (80 per cent) or direct equities (65 per cent).

Further to their ability to assist with compliance and back-office tasks, users also acknowledged how managed accounts enabled them to navigate the challenges brought about by the COVID-19 pandemic in 2020.

Reflecting on their experience of using managed accounts in navigating the market volatility and business disruptions throughout the 2020 lockdowns, users were predominantly positive. The report found that the vast majority of users rated the impact of managed accounts as ‘good’ or ‘very good’ for its transaction execution speed/quality (88 per cent), strengthening their value proposition (83 per cent) and help in achieving better client outcomes (83 per cent) during this difficult period.

“The positive impact of managed accounts on advisers and their clients during COVID-19 is possibly the most powerful testament to the role they can play as a backbone for advice businesses - both big and small,” says Guiamatsia.

The Investment Trends 2021 Managed Accounts Report examined financial advisers’ use of managed accounts and their views on managed accounts providers. The findings are based on an in-depth survey of 905 financial advisers conducted in January 2021.