Managed accounts market to almost double in two years – technology to drive innovation

From

Andrew Alcock

The managed accounts segment is on the cusp of a revolution in managed portfolio design and functionality, says leading wealth management platform HUB24 (ASX: HUB).

The $60 billion already invested in managed accounts is forecast to grow at 40% a year for at least the next two years, taking the managed account industry to more than $115 billion by 2020, according to the industry association IMAP[1].

A new white paper, The Future of Managed Portfolios, prepared in conjunction with research firm Coredata foresees platforms, as well as managed accounts, entering a new phase in their evolution.  Industry leaders from across the investment management world shared their insights for the paper.

“Managed portfolio providers are moving quickly to meet this increasing demand, refining offerings and enabling flexibility in design and construction that was previously available to only the very largest investors,” the paper notes.

Commenting on the research, HUB24 Managing Director, Andrew Alcock, says: “This rapid increase in growth will be due to technology that supports financial advisers’ delivery of even more sophisticated and tailored solutions providing enhanced outcomes for their clients, while at the same time continuing to deliver significant cost benefits and revenue opportunities for advice practices.”

The report, however, cautions advisers against making the mistake of thinking all managed portfolio solutions provide the same client benefits.

“Not all managed portfolio solutions are created equal and this assumption could see advisers backing the wrong horse in the technology race – and have significant implications for an advice business and its clients further down the track.”

In addition to becoming an increasing point of differentiation for managed portfolio providers, the research found constant innovation will also open a range of new opportunities for advisers and their clients, facilitating more timely and efficient trading of offshore ETFs, currencies and multi-asset portfolios.

Mr Alcock adds: “Future innovation will allow for further customisation of portfolios without additional complexity and more focused outcomes for clients. This is as a result of managed portfolio providers working closely with investment managers to deliver technology that embeds asset management capabilities in the platform”

Leaders emerging

The whitepaper also identifies a division emerging in the wealth management platform market as some providers surge ahead with a second phase of development and features, leaving others behind.

It says: “The traditional value proposition of a platform provider has been about choice, efficiency and lower cost, but that is changing.

“The effectiveness of a managed portfolio today should be assessed not on the basic provision of investment choice or on transacting and reporting, but on a range of other factors and features that provide better outcomes for clients and improve advisers’ businesses.”

The paper cites the example of technology making individual client portfolios more ‘tax aware’. “The possible long-term benefits to a client of managing investments tax-effectively can outweigh the benefits of a few basis points of extra investment performance from constantly chasing better investment returns from the multitude of investment choices available.”

Jason Entwistle, Director of Strategic Development at HUB24 adds platforms are entering a second phase of evolution, further transforming the industry. He suggests a ‘one-size-fits-all’ approach will soon be a thing of the past.

“Platforms hold vast amounts of data which can be used to help advisers deliver better, more targeted services. We see ourselves as custodians of this data and are creating tools to help advisers deliver better and more tailored outcomes for themselves and their clients,” says Mr Entwistle

HUB24 was recognised for ‘Best Managed Accounts functionality’ in the Investment Trends 2017 Platform Competitive Analysis and Benchmarking Report for the second consecutive year.

See more in The Future of Managed Portfolios whitepaper.

[1] According to data from the Institute of Managed Accounts Professionals (IMAP).

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