By Jayson Forrest
Andrew Mathie (Praemium) reveals key insights from Praemium’s latest research to explain why using managed accounts can help differentiate an advice service.
The two factors that clearly differentiate advice practices using managed accounts, which help drive their success are: they consistently work on the business, not just in it; and, they prioritise the client experience.
These were two of the key findings of research into advice businesses using managed accounts commissioned by Praemium, in conjunction with advisory consulting practice Business Health. The research — Profit Facts & Key Success Drivers, Elevating Your Business with Managed Accounts — was based on a survey in 2022 of 224 advice practices nationwide to look at what successful advice practices were doing differently in their businesses.
Speaking at the IMAP Advice in Action 2023 Conference, Andrew Mathie — General Manager Distribution, NSW & ACT at Praemium — revealed the findings of the research, which clearly showed the benefits of using managed accounts to differentiate an advice business, whilst significantly improving the efficiency and profitability of a business.
Andrew Mathie - Praemium
The correlation between an increased use of managed accounts and profit uplift isn’t random. Managed accounts are a powerful differentiator to help elevate advice businesses
Working on the business
According to Andrew, the most successful Australian advice firms using managed accounts all shared five common success (or profit) drivers. These were:
- Regularly sought client feedback;
- Had a documented five-year plan;
- Had a documented client value proposition;
- Regularly sought external advice; and
- Had a strong client focus.
“These advice practices take a strategic approach to their business,” says Andrew. “They deliberately set aside time — either weekly, fortnightly, or monthly — to work on growing and building their business. This includes developing a strategic plan, which is typically built over a five-year period. It outlines their vision and how the business will evolve over that timeframe.
Chart 1: Advice firms working on their business
The Praemium research indicates that firms leveraging managed accounts are refining their businesses. According to Andrew, these businesses have a clear picture of future success, and are open to insights and advice from outside their respective organisations in order to improve.
“The correlation between an increased use of managed accounts and profit uplift isn’t random,” he says. “Managed accounts are a powerful differentiator to help elevate advice businesses.”
Climate change is real, particularly when you look at what’s happening climatically around the world. Climate change weighs heavily on the mind of investors… With the demand for ESG coming across all demographics, advisers need to be offering ESG as part of their investment solutions, or risk losing both existing and emerging clients
Prioritising the client experience
The Praemium research also revealed some interesting insights about what clients valued as part of the client experience. These include:
- 91 per cent of clients want an adviser who ‘gets’ them;
- 71 per cent require advisers with shared values and/or political leanings;
- 70 per cent want to meet advisers face-to-face;
- Only 17 per cent want a digital only relationship;
- 55 per cent feel the advice they receive is too generic; and
- 34 per cent would increase investments if they received a hyper-personalised experience.
Although they may be tech savvy, emerging investors do understand the value and importance of a face-to-face relationship. They expect a personalised wealth service, which blends together both a digital and face-to-face experience
Chart 2: Advice firms prioritising the client experience
Andrew believes the time savings derived from using managed accounts clearly provide an opportunity for advice businesses to invest more heavily in the client experience. He says that advice firms that use managed accounts do record a significant uplift in client engagement, which translates into deeper and more meaningful relationships.
“Reviews with clients become more detailed and thorough, and client feedback becomes a more frequent occurrence,” he says. “These all ensure that an advice practice becomes more closely aligned with the needs of clients.”
You need to customise your services and tailor your approach to the unique needs of your clients, and that’s where managed accounts come in. Managed accounts are a strategic tool that advice businesses can use to differentiate their service offering, while enhancing their client engagement and value proposition
Future-proofing your practice
One of the biggest risks facing financial advisers is the intergenerational transfer of wealth, which Andrew believes will accelerate over the next two to three years. In order to meet this challenge, advice businesses will increasingly need to meet the demands of the next generation, particularly across the areas of: personalised service, digital experience, ESG, and investment opportunities.
Personalised service
The next generation of clients could well be the children of existing clients. This next generation want a holistic service offering, which managed accounts are well placed to deliver through customised investments.
“Managed accounts offer advisers the benefits and ability to tailor portfolios for clients. They also enable advisers to deliver tailored communication that is specific for the needs of investors,” says Andrew.
He adds that advice businesses that were early adopters of managed accounts have started to look at AI machine learning to drive additional efficiencies with how they engage with their clients. As he says: “More personalised engagement, means more satisfied clients.”
Digital experience
Smart technology has been one of the biggest drivers in changing consumer behaviour over the last decade. Statistics from the research reveal that: 40 per cent of clients preferred self-service over human contact; 50 per cent of clients believe their adviser should offer a digital solution; and 60 per cent of emerging high-net-worth investors would welcome the ability to access and manage their whole portfolio through a single digital experience.
“Technology is an enabler, so advisers need to think carefully about how they use it within their business,” says Andrew.
ESG
The demand by investors for ESG investment solutions, across all demographic groups, continues to grow strongly. Findings from the research reveal that: 82 per cent of retail investors want to invest in companies that are socially and environmentally responsible; 72 per cent of clients will deliberately avoid investing in any industry that is contributing to climate change; and 81 per cent of investors want investments that directly match their values
“Climate change is real, particularly when you look at what’s happening climatically around the world,” says Andrew. “Climate change weighs heavily on the mind of investors, and it’s driving a lot of the ESG strategies we’re adding to the Praemium platform.
“With the demand for ESG coming across all demographics, advisers need to be offering ESG as part of their investment solutions, or risk losing both existing and emerging clients.”
Investment opportunities
According to Andrew, managed accounts have opened up an array of investments that previously were not available to retail consumers. There is now an increased awareness amongst investors of different types of investment opportunities — such as cryptocurrency and ETFs.
Attracting the next generation
The Praemium research reveals that in the three-year period to 2022, there was a rapid growth in new millionaires, with a significant amount of this wealth coming from inheritances.
“Advisers need to have a relationship with the children of their clients who are likely to inherit the family wealth,” says Andrew. “The next generation of clients told us they had unmet advice needs, and even though they may be Millennials or Gen Z, they do have a strong preference for using an adviser.
“Although they may be tech savvy, emerging investors do understand the value and importance of a face-to-face relationship. They expect a personalised wealth service, which blends together both a digital and face-to-face experience.”
Andrew believes the key to making the right impression with the next generation of clients starts with education — the earlier, the better.
“The more time you spend educating them on what you do, and how financial advice can align to their values and help improve both their financial and mental wellbeing, the more closely aligned they will be to your business,” he says.
Business differentiation
According to Andrew, in terms of the tangible benefits of using managed accounts for an advice business, the findings of the Praemium research are very clear. Businesses using managed accounts not only scale more effectively, but also secure a significantly higher share of the client’s wealth.
“It’s important to remember that managed accounts are not just about efficiency or profitability, they’re also about differentiation,” says Andrew. “If you’re an adviser, you’ve got to differentiate yourself in a competitive environment.
“So, you need to customise your services and tailor your approach to the unique needs of your clients, and that’s where managed accounts come in. Managed accounts are a strategic tool that advice businesses can use to differentiate their service offering, while enhancing their client engagement and value proposition.”
Chart 3: Key success drivers translate to profits
About
Andrew Mathie is General Manager Distribution — NSW & ACT at Praemium.
He spoke on ‘Differentiating your advice service with managed accounts’ at the IMAP Advice in Action 2023 Conference.