Overcoming detours and roadblocks for successful implementation

By Jayson Forrest - Managing Editor  - IMAP Perspectives

There are a range of potential obstacles to avoid when implementing a managed accounts structure. Brent Bevan (MLC) identifies the key obstacles and provides solutions to overcoming them.

Implementing a managed accounts solution in an advice practice involves much more than simply selecting the right provider. It’s an opportunity to refine the practice’s value proposition and align business processes behind it.

However, speaking at the 2022 IMAP Advice in Action Conference, MLC’s Brent Bevan (Head of Investment Consulting - Managed Accounts) emphasised that no one managed accounts solution is the same, requiring advice businesses to navigate some unexpected speed bumps, detours, and potential roadblocks along the way.

“A typical managed accounts journey starts with the idea phase, which leads to the selection and build phase, followed by the implementation phase. But what many advisers and advice businesses forget are the number of speed bumps along the way,” says Brent.

“These speed bumps include not getting the transition planning right, evolving your value proposition, and underestimating cultural change within the business. Advisers need to address these obstacles before they become major impediments in the implementation of a managed accounts solution.”

According to Brent, there are three potential speed bumps advisers need to be aware of. These speed bumps can slow a business’s progress with its transition to a managed accounts offering. They are: client segmentation; operational detail; and change overload.

Each of these speed bumps can be addressed in the following way:

1. Client segmentation - Look at your clients and consider if they are suitable for managed accounts. By embracing the scale that managed accounts offer, advice practices can rethink and simplify their client segmentation.

2. Operation detail - Undertake proper due diligence of managed accounts, and ensure advisers understand the SMA or MDA model you are planning to use, including any technology limitations around that. “Advisers should also seek user insights from other advice businesses, platforms, fund managers or consultants that use the structure you are considering,” says Brent.

3. Change overload - Changing over to a managed accounts structue can be challenging, for both advisers and clients. Brent recommends advice businesses proactively ensure that advisers and support staff are comfortable with managed accounts and understand the structure. “I would also recommend first testing managed accounts with a batch of clients to iron out any problems, before trying to implement a full rollout across the business,” he says.

Potential detours can lead to tangent routes and long transition delays. Three of the more common detours when implementing managed accounts are: a lack of transition planning; client hoarding; and attempting market timing. These detours can be addressed as follows:

1. A lack of transition planning - An advice practice must thoroughly address the transition process in the initial build out phase of managed accounts. This includes the types of portfolios, as well as third-party providers, like platforms and asset consultants. “The transitioning process also presents challenges with Best Interest Duty, the practice’s value proposition, and the need to properly address any client objections,” says Brent. “All of these issues need to be dealt with.”

2. Client hoarding - Advisers need to see that the managed account service can add value for all their clients. ‘X and Y wouldn’t like it’, isn’t a useful frame of mind.

3. Attempting market timing - By trying to time the market for moving clients into managed accounts when returns have been poor (like now), advisers run the risk of a commitment to sunk cost investments and missing the upturn.

Bevan identified five potential roadblocks: Best Interest Duty challenges; adviser value proposition; underestimating cultural change; failure to meet expectations; and licensee requirements.

These roadblocks present advisers with significant delays and/or risks the ability for the advice business to fully execute and implement its managed accounts offering. To overcome these roadblocks, he offers the following advice.

1. Best Interest Duty challenges - “Advisers need to understand what is being gained by introducing managed accounts, and not just what it’s costing the client and business,” says Brent. “Avoid making too many compromises with your program, which can become long-term challenges for the business. And importantly, understand your licensee’s view on managed accounts. If it’s a narrow view, then work to amend it. This includes enlisting your consultant to help support your case.”

2. Adviser value proposition - Remember, managed account structures don’t have to be rigid. There are many HNW firms using SMA programs. You don’t have to be a highly niched or specialist business to offer managed accounts. There are plenty of traditional advice businesses providing managed accounts, so you don’t have to re-invent the wheel. Instead, seek out their expertise and find a solution that aligns with your particular value proposition.

3. Underestimating cultural change - Licensees and advisers need to manage the cultural change within their business, which includes information and training sessions for staff. “It’s incredibly important that you get buy-in and full engagement from everybody within your business, not just the senior people,” says Brent.

4. Failure to meet expectations - If expectations in the implementation process are not being met, you may need to re-examine your due diligence with your managed accounts structure, including strengths and weaknesses, as well as the overall tender process. “You may also need to consider what you actually want from your partnership with a platform, managed account provider or consultants,” he says.

5. Licensee requirements - And finally, ask your licensee about their requirements for managed accounts. If there are obstacles, what are they and how can they be rectified? You may want to consider bringing in a consultant to help support your case.

“There are a number of potential obstacles to avoid when implementing a managed accounts structure,” says Brent. “The key to overcoming these obstacles is to be aware of them, and to ensure that the service offering you build specifically addresses these. And don’t forget the importance of having a quality due diligence process, and the value in seeking experienced external advice with your managed accounts offering.”

In summary, Brent says that by considering the potential obstacles at an early point will lead to a better outcome for both clients and advice practices.

Brent Bevan is Head of Investment Consulting (Managed Accounts) at MLC.

He spoke on a session titled - ‘Potholes and roadblocks on the road to business improvement’ - at the 2022 IMAP Advice in Action Conference.