Sinead Schaffer

Managed accounts have overtaken other investment vehicles to become the preferred core portfolio solution for Australian financial advisers, according to the newly released 17th State Street/Investment Trends Managed Accounts Report. The research, published today by State Street Investment Management, Australia’s largest asset manager^[1], together with Investment Trends, is based on the responses of 1,086 financial advisers across Australia between November 2025 and January 2026. It finds managed account adoption has firmly entered the mainstream, as advisers respond to heightened market volatility, persistent inflationary pressures and rising operational complexity.

Adviser usage has reached a record level, with 61% of advisers now using managed accounts and a further 13% actively considering adoption, taking potential market penetration close to three-quarters of the adviser industry. Notably, new adoption has accelerated, with 27% of advisers having recommended managed accounts for one year or less.

Conviction among users is deepening. Nearly three-quarters (73%) of advisers who use managed accounts now position them at the center of client portfolios as a core solution rather than as satellite allocations. Reflecting this shift, advisers now direct 61% of new client flows into managed account solutions, up from 48% in 2025.

Over 40% of advisers agreed that during periods of market volatility their clients in managed accounts are more confident in their portfolios and less likely to make impulsive portfolio changes compared with those not in managed accounts.

“Advisers are increasingly turning to managed accounts to bring greater discipline, consistency and oversight to portfolio construction,” said Sinead Schaffer, Vice President and Model Portfolio Strategist in Asia Pacific at State Street Investment Management. “In an environment marked by ongoing economic uncertainty, heightened geopolitical tensions and persistent inflationary pressures, advisers are looking for scalable, outcomes‑focused solutions. Managed accounts help support long‑term investment discipline while simplifying portfolio management and rebalancing.”

Managed accounts funds under management (FUM) have reached a record of $256 billion^[2], with the industry expected to grow to $400 billion by the end of 2027.

Beyond client outcomes, advisers are also seeing tangible commercial benefits. Almost six in ten (59%) say managed accounts have improved business profitability. Adoption is highest among larger and more profitable practices.73% of advisers from practices with more than 5 advisers use managed accounts, compared with 61% of advisers in practices with 2 to 5 advisers and 54% of sole advisers. Around two‑thirds (65%) of advisers from practices reporting net profit margins above 30% are using managed accounts, versus 59% of advisers from practices with net profit margins below 30%.

Efficiency gains drive adoption as operational pressures mount

The strongest benefits cited by advisers are operational. Seven in ten (70%) point to simplified portfolio management and rebalancing as a key advantage, while around 60% highlight time savings, reduced compliance workload, and improved scalability. Notably, 59% of those who reported time savings say managed accounts allow them to service a larger client base, driven by the time saved through automation and streamlined processes.

Governance benefits are also being recognised. Around half of advisers say managed accounts strengthen governance and support best interest obligations, an impact that is particularly pronounced among smaller advice practices.

“As managed accounts move into the core of advice delivery, advisers are reporting benefits that extend well beyond investment implementation,” said Eric Blewitt, CEO of Investment Trends. “Many cite easier portfolio monitoring and access to institutional‑quality investment management as key client benefits, while practice benefits – particularly simplified management, time savings, and reduced compliance workload – are reinforcing managed accounts as an essential operating tool for advice businesses.”

Implementation barriers continue to ease. One in four advisers (23%) now report no challenges implementing managed accounts, up from 18% the previous year. Among advisers yet to adopt, the main hurdles are less about belief in the benefits and more about the perceived cost, effort and complexity of transitioning existing clients.

Performance and platform access shape adviser decisions

When recommending managed accounts, advisers rank performance as the most important factor (46%), followed by availability on their primary investment platform (35%), competitive fees (28%), and the reputation of the asset manager (26%).

Advisers want solutions that deliver consistent outcomes for clients while integrating easily into their existing platforms and advice processes. Managed accounts are typically aligned to clients’ risk tolerance and investment horizon, and are most commonly used for longer-term investors. More than half of advisers use managed accounts for clients investing for 6 years or longer, with an average investment horizon of 7.6 years.

SMAs remain the preferred choice by advisers

Separately Managed Accounts (SMAs) remain the most widely used managed account structure, with around nine in ten advisers implementing managed accounts via SMAs.

Off-the-shelf solutions continue to dominate, with one-third of advisers using pre-built models with minor customisation. Ease of implementation, cost efficiency for clients and reduced rebalancing requirements underpin their popularity. Use of ETFs within managed accounts is also rising, with passive ETF allocations increasing from 16% to 21% year on year.

Australian investors typically access model portfolios through managed accounts. State Street Investment Management officially launched its ETF Model Portfolio capability in Australia in 2019, offering five model portfolios across the risk spectrum and target income strategy. Model portfolios employ diversified investment approaches designed to balance risk and return in line with specific investment objectives.

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Notes:
[1] Source: Rainmaker Wholesale Advantage Report, as of September 30 2025.
[2] Source: IMAP/Milliman, as of June 30, 2025.

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Kathleen Gallagher

Model portfolios have shifted from niche to mainstream, both in the United States (US) and Australia, marking a major change in the financial advisory landscape. In the US, model portfolio assets are on a remarkable trajectory and are expected to reach US$3.4 trillion by 2027^[1], while in Australia, model portfolios implemented via managed account have grown nearly 30% in just one year – more than doubling over five years^[4].

This growth is driven by evolving client expectations. Over the past five years, investors have come to expect more from their advisers, increasing the demand for efficient and effective investment strategies. Model portfolios have proven invaluable, freeing up advisers’ time to focus on client relationships and strategic advice. In fact, 60% of advisers cite time savings as the main benefit, with many redirecting nearly a full day each week to highervalue activities.^[2] In the US, this benefit is realised by 55% of advisers, who use model portfolios to spend more time on financial planning.^[2]

Investor awareness is rising. In Australia, investors who know their assets are in model portfolios report significantly higher satisfaction with their advisers, valuing transparency, effective issue resolution, and portfolio optimisation. However, nearly half of investors remain unaware of their model portfolio holdings, highlighting an opportunity for further education and engagement.^[3]

By understanding the trends and developments in the US market, we can gain valuable insights that may shape the future of the Australian model portfolio market.

Alternatives: Expanding the investment universe

A notable trend is the growing inclusion of alternative investments in model portfolios. In the US, demand for private assets is driven by their potential to provide diversification, downside risk protection, reduced volatility, and enhanced return potential. Providers in this region often offer dedicated models of alternatives, rather than integrating them into multi-asset portfolios. The demand for private markets exposure is mirrored in Australia, with over a third (35%) of managed account advisers keen to access them through managed accounts.^[2] Both locally and abroad, platforms are evolving to better support the valuation and administration of these less liquid assets.

Asset allocation and investment themes

In the US, most model portfolios are risk-based (73%), with 21% focus on specific investment objectives. Strategic asset allocation (SAA) is used by 81% of models, and 63% employ tactical asset allocation (TAA).1 ETFs are increasingly preferred as portfolio building blocks, with passive ETFs representing nearly 40% of model assets.^[1] In Australia, managed account advisers allocate close to two-thirds of client assets to managed accounts as the core, supplementing with term deposits or actively managed funds as satellites.^[2] Growth-oriented strategies remain popular, with two-thirds of advisers adopting them, while risk-based strategies are used less frequently than in the US – 45% – particularly for clients with assets between $500k and $1.5 million.^[2]

Adviser experience and due diligence

In Australia, advisers are recommending fewer models — 12 on average, down from 22 in 2024 — reflecting a focus on efficiency and reduced duplication. Due diligence remains resource-intensive, with advisers using five tools on average, including investment manager reports, platform information, and research house tools. Performance is the most important factor when selecting managed accounts, followed by platform availability and fees. This trend is consistent in the US, where performance, investment policy, and fees are the top factors used to differentiate model portfolio offerings.^[1]

Locally, the benefits of managed accounts become increasingly evident over time. Advisers with four or more years of experience using managed accounts report, on average, 35% higher client inflows and FUA balances compared to newer users. The value proposition is evolving, with 38% of advisers outsourcing portfolio construction to investment professionals, 20% delivering more tailored services, and 26% are shifting their value-add from investment returns.

As the investment landscape evolves, exploring optimal strategies is essential. if you’re looking to leverage ETFs within model portfolios, visit the State Street ETF Model Portfolio webpage to discover how our solutions can enhance your investment approach with greater transparency, performance, and cost-efficiency.

By Kathleen Gallagher, Head of ETF Model Portfolio Solutions EMEA & APAC and Sinead Schaffer, ETF Model Portfolio Strategist

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Notes:
[1] Cerulli Report, U.S. Asset Allocation Model Portfolios 2024
[2] SPDR ETFs / Investment Trends 2025 Managed Accounts Report
[3] State Street Investment Management Model Portfolios: Adaptive Solutions for Advisory Growth research, December 2024.
[4] 4 IMAP’s FUM Census of Managed Accounts, as at 30 June 2025

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Sinead Schaffer

State Street Global Advisors, the asset management business of State Street Corporation (NYSE: STT), together with Investment Trends, has released a new report revealing the proportion of advisers using managed accounts in Australia has reached a record high of 59%, tripling from 20% a decade ago. A further 16% of advisers have expressed interest in adoption, potentially bringing the total reach to 75% in the coming years.

The 16th SPDR ETFs / Investment Trends Managed Accounts Report (‘the Report’), which surveyed 946 financial advisers across Australia between November 2024 and January 2025, showed that, amidst persistent global economic uncertainty, escalating inflationary pressures, and a rapidly evolving investment landscape, demand for managed accounts continues to be robust.

The Report showed advisers using managed accounts allocate, on average, close to three-fourths (71%) of clients’ total assets into these accounts. Additionally, managed accounts advisers are directing a record 48% of new client inflows to managed accounts, setting a new high—up from 41% in 2024, reflecting the growing prominence of managed accounts as a primary investment structure.

This explains why funds under management (FUM) in managed accounts have surged 23.2% in the 12 months to December 2024 to a record-breaking $232.77 billion^[1] .

State Street Global Advisors’ Vice President and ETF Model Portfolio Strategist, Sinead Schaffer, said: “The growing adoption among the latest cohort of users is primarily driven by the demonstrated value managed accounts bring to both advisers and their clients. While freeing up their time to focus on client engagement is the key benefit of recommending managed accounts, advisers also see using managed accounts as a cost effective way to access professional investment management for their business.

“The research also found that advisers using managed accounts for longer periods reported higher funds under administration (FUA), suggesting that longer-term adopters benefit from more profitable businesses compared to newer users.”

General Performance is the most important factor when selecting a managed account

Ms Schaffer said the top reason for recommending managed accounts to clients is the ability to achieve full asset allocation, with their top selection criteria being performance, fees, ability to achieve full asset allocation, availability on their main investment platform, and reputation of the asset manager.

“Half of the financial advisers chose performance as the most important criteria when selecting a managed account, while availability on the main investment platform has now surpassed fees as the second highest priority,” added Ms Schaffer.

Saving 23.9 hours a week by using managed accounts

This year, the Report again highlighted the time-saving efficiencies of managed accounts with 60% of advisers citing ‘freeing up their time’ as one of the main upsides of using managed accounts. Advisers reported they, or their support staff, save an average 23.9 hours per week as a result of using managed accounts in their practice, up from 22.8 hours a year ago, equivalent to approximately 1,243 hours saved each year.

Investment Trends CEO Eric Blewitt said the time savings allow advisers to focus their efforts on better understanding and supporting client goals.

“Each year more advisers are turning to managed accounts because they allow for a more holistic approach to wealth planning. The ability to tailor portfolios to meet the specific financial and lifestyle goals of clients is one of the leading reasons advisers are choosing to switch to managed accounts.”

“In fact, one in five advisers report being able to offer a more tailored service to clients due to the flexibility these accounts provide. As a result of time saving, 48% of advisers reported redirecting that time to enhance client relationships, while 26% are using it to acquire new clients,” Mr Blewitt added.

Increase efficiency by streamlining the number of managed account models

The Report showed that multi-asset class models are the most widely used, as 68% of advisers recommended the models in the past year. Additionally, the ability to achieve full asset allocation is a key reason advisers recommend managed accounts to their clients.

That said, this year advisers have reduced the number of models they recommend to clients from 18.2 in 2024 to just 12.1 this year.

Ms Schaffer explained: “The due diligence process can be resource intensive, with advisers on average using five tools when conducting their assessment of managed accounts. As a result, both adviser and licensee have reduced this burden and simplified their approach by reducing the number of strategies they recommend.”

SMAs remain the most preferred choice by advisers

The Report showed that 89% of advisers implement managed accounts with separately managed accounts (SMAs) on platform.

Mr Blewitt said: “Among current managed account advisers who use SMAs on platform, 71% of them use off-the-shelf model. However, it is interesting that custom-built SMAs are particularly popular with experienced managed account advisers. They are allocating 57% of new client inflows to these tailored solutions.”

Other key findings:

• Managed account advisers leaned toward growth-oriented (65%) and risk-based (44%) strategies in the past 12 months, but a third remain uncertain which strategies they would use going forward, reflecting macroeconomic uncertainty.
• Separately managed accounts (SMAs) on platform remain the most widely used structure to implement managed accounts. With 89% implementing managed accounts with an SMA on platform.
• 53% noted ETFs are the underlying products in their managed accounts.
• The group of non-users remains substantial at 19%, however they are open to being persuaded by reduction in platform fees and better research.

State Street Global Advisors officially launched its ETF Model Portfolio capability to the Australian market in 2019, through various intermediaries.

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Notes:
[1]  Source: IMAP/Milliman FUM Census, as at 31 December 2024

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That said, investors are encouraged not to chase yield at any cost. With the average Australian male living to 81.2 years old and female living to 86.6 years old4, retirees need to ensure their investments not only provide an income but also grow for 20-plus years. We explore how investors can target yield without abandoning the pursuit of capital growth over longer-term investment horizons.

The corrosive effects of inflation

Investors should consider the longer-term impact of inflation, as the value of a dollar today will be worth less in the future, assuming positive inflation. The chart below shows what has happened to the real (i.e. net of inflation) value of $100,000 over the past 20 years due to the effects of inflation. Despite annual inflation averaging 2.56% during this period, the real value of money fell by 40% over the same time frame. Therefore, investors require a return greater than inflation to maintain their purchasing power.

Reality check – the sporadic nature of bond returns

While many investors hold bonds in their portfolio to generate income and reduce their exposure to volatile assets, the chart below demonstrates that real bond returns have only been sporadically positive, providing negative returns about 30% of the time over the past 20 years. Specifically, the past three years have seen some large declines in nominal and real terms. To maintain their purchasing power, investors need to look beyond just fixed income.

Taking stock – aiming higher could pay dividends

When seeking to generate income from dividends, an investor has received a reasonable yield of around 4.34% p.a. from Australian equities or 2.35% p.a. from global equities over the past 20 years. However, a more attractive income could have been achieved with a high-dividend-yield equity strategy. This would have increased the dividend income generated to 8.05% p.a. and 5.13% p.a. for Australian and global equities, respectively, over the same 20-year period. Therefore, investors should be selective with equity allocation and incorporate stocks with a greater chance of paying higher dividends.

A joint effort – multi-assetyield with equities, bonds and cash

While dividend-income-focused strategies can achieve higher levels of income than bonds, it is also important to note that this comes with elevated levels of volatility vis-à-vis income and total capital return, as equity markets are more volatile. One way to overcome this volatility and generate a high level of income is to combine equity dividend investing with fixed income and cash to provide a less unpredictable and more diversified income profile. The State Street Target Income ETF Model Portfolio shows the result of this combination in the chart below.

By Sinead Schaffer, ETF Model Portfolio Strategist VP and Clive Maguchu, Senior Strategist 

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Notes:
[1] Retirement and Retirement Intentions, Australia, Australian Bureau of Statistics. August 2023
[2] Retirement Income Review, Commonwealth of Australia, July 2020
[3] Older Australians, Australian Institute of Health and Welfare, June 2023.
[4] Life Expectancy, Australian Bureau of Statistics. November 2023

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