Colonial first state joins with Lonsec, Morningstar and Zenith to launch managed accounts solution with no additional fee

From

Bryce Quirk

Australian wealth management group Colonial First State (CFS) has announced an agreement with three of Australia’s leading research consultants to offer financial advisers and their clients a highly efficient way to access professionally constructed managed account portfolios – with no extra research or portfolio construction costs.

The new arrangements have been developed in response to adviser feedback, seeking ways to lower the cost of advice while maintaining the quality of the investment solution.

From today, 23 new Managed Accounts Specialist Portfolios will be available via CFS’s $76 billion FirstChoice Personal Super and Pension platform:

  • Lonsec Active (6 risk profiles)
  • Morningstar Core (6 risk profiles)
  • Morningstar Active (6 risk profiles)
  • Zenith Active (5 risk profiles)

Bryce Quirk, Chief Distribution Officer at Colonial First State, said: “We are thrilled to be working with Lonsec, Morningstar and Zenith – Australia’s leading names in investment research and portfolio construction – to bring a sophisticated, easy to access investment solution to a wider range of everyday Australians.”

“Through our new arrangements we’re packaging up the best investment insights while at the same time helping clients save on fees paid for accessing the managed account structure and professional portfolio management, typically between 10-to-30 basis points per annum,” Mr Quirk added.

“Advisers also save valuable time and effort implementing and administering portfolio changes, allowing them to spend more time on working with clients to meet their goals.”

The new FirstChoice Managed Accounts Specialist Portfolios come at a time when advisers are juggling growing demand for advice by a broader array of Australians – while also facing intense cost and compliance pressures.

The number of unadvised Australians who intend to seek financial advice in the next two years rose to 2.6 million in 2020 from just 1.3 million in 2015, according to Investment Trends’ 2020 Financial Advice Report, which surveyed 4,501 people in July 2020 – a few months into the COVID-19 pandemic.

“COVID-19 has been a wakeup call for many Australians who have taken time during lockdowns to reassess their financial situation. We are focused on finding ways to help advisers come up with more streamlined, more cost-effective solutions that keep the cost of investing as low as possible so that more people can access advice,” Mr Quirk said.

Mr Quirk said the new solution combined the flexibility, convenience and transparency of a managed account with the simplicity and efficiency of the FirstChoice platform. Clients will pay the fees and costs of the underlying investment options, but no additional managed account fee, platform fees or implementation costs will apply.

Growing popularity of packaged solutions

A managed account is a combination of investments managed by a professional investment manager on behalf of investors. Managed accounts are seen as an effective tool for managing multiple client portfolios in a cost-efficient way. These ‘Specialist Portfolios’ aim to suit a range of typical investor needs and preferences – such as 35-50 year-olds looking to actively accumulate funds, or pre-retirees looking to dial down risk while generating income returns.

Research released this month from IMAP showed continued strong demand from Australian investors with managed accounts housing $111 billion in funds under management at 30 June 2021 – an increase of $15.8 billion in the previous 6 months alone and $80 billion in the 5 years to June 30 2021[1].

Lonsec is a long-time collaborator with CFS having provided model portfolio solutions for a number of advice licensees using the FirstChoice platform for more than a decade. The architect of these original model portfolios, Lonsec Chief Investment Officer Lukasz de Pourbaix, said he was excited at the opportunity to now leverage this experience in a managed account solution.

“Advisers and investors are clearly embracing managed accounts and this partnership allows us to extend our model portfolio expertise via an implemented solution which will be affordable and accessible to a wider range of investors,” Mr de Pourbaix said.

Mr Aman Ramrakha, Director of Manager Selection Services at Morningstar, said today’s announcement is consistent with the industry shift to greater transparency and efficient investment solutions.

“We’ve heard from advisers that they want easier ways to invest client funds in line with our independent manager research. Now they have a pathway to engage in those ‘best ideas’ from our research team,” Mr Ramrakha said.

“Advisers today have to be relentlessly efficient to thrive, and this new agreement is a major efficiency gain for the market. Advisers can now select the best solution for their practice, whether using our research to construct their own portfolios, or investing in our best ideas pre-packaged for them – all while offering full transparency to their clients,” he added.

Zenith Head of Consulting Steven Tang said Zenith was excited to be part of the offer – it being the first time FirstChoice has offered Zenith’s Managed Accounts portfolios to its extensive client base.

Zenith manages around $3 billion in funds across its managed accounts structures and has been running model portfolios for FirstChoice since 2009. The new Zenith Active managed accounts will leverage these underlying model portfolios and are designed to utilise Zenith’s ethos of investing in the best active managers, while remaining resilient to market cycles.

Mr Tang said efficiency gains of the new offer would also be a benefit for both advisers and their clients, with portfolio changes executed on a same day buy/sell basis.

“We see the execution efficiency of the managed accounts structure being even more accentuated on FirstChoice, making portfolio updates easy for advisers and avoiding clients’ money being out of the market for days,” he said.

The new FirstChoice Managed Accounts Specialist Portfolios build on FirstChoice’s existing advantages for advisers. Wealth Insights ranks FirstChoice #1 from advisers in Value and Administrative Support in 2021. Investment Trends’ Planner Technology Report for 2020 ranks CFS FirstChoice #1 as the Best Value for Money: Platform.

——–

[1] Data released on 14 September 2021 by the Institute of Managed Account Professionals Ltd (IMAP) in conjunction with Milliman in its six monthly Managed Accounts FUM Census long term series.

You must be logged in to post or view comments.