Steven Tang

A new report from Zenith Investment Partners reveals that 92 per cent of financial advisers save time on administrative tasks by using managed accounts, freeing up hours for client-focused work and leading to potentially improved investment outcomes for investors, says Steven Tang, head of portfolio solutions with Zenith Investment Partners.

Zenith’s “Unlocking Advice Efficiencies in 2025” report explores the challenges and opportunities financial advisers face and the role that managed accounts can play to help them provide more efficient, client-focused outcomes. Based on insights from 460 Australian financial advisers, the report uncovers key trends, challenges, and opportunities for the financial advice sector.

The report found that advisers are comfortable outsourcing investment management to managed account experts if it means they can spend more time supporting their clients and achieving efficiencies for their practices.

“Advisers are sending a strong message through their adoption of managed accounts. Our report found strong overall satisfaction: 81 per cent of respondents report being satisfied or extremely satisfied with their managed account provider, indicating broad approval of service quality,” Mr Tang says.

“In addition, managed accounts are demonstrating their value to advice businesses, with 92 per cent of advisers reporting time savings in administrative tasks and 81 per cent expressing overall satisfaction. However, challenges exist to their broader adoption. The migration of legacy portfolios, cost considerations, and client preferences for bespoke solutions key barriers to the broader adoption of managed accounts in Australia.”

Scaling advice is seen as another critical challenge of using managed account, with a significant preparedness gap revealed across all practice sizes. Boutique practices being the least prepared (37 per cent readiness vs. 72 per cent perceived impact), the report found.

Still, advisers report significant efficiency gains from adopting managed accounts, with 44 per cent indicating time savings in administrative and research tasks of up to 25 per cent. Notably, custom or private label managed accounts offer the greatest time reductions, particularly for practices seeking higher operational efficiency.

“While larger and high-growth practices lead the way in managed account adoption, boutique and conservative practices face hurdles with implementation and strategic alignment,” Mr Tang says.

More generally, advisers rank investment philosophy, performance and fees as the top factors when selecting a managed account provider. Private label solutions are preferred for alignment with investment philosophy, while off-the shelf options attract cost-conscious advisers due to lower fees.

“The report found that 50 per cent of advisers cite investment philosophy as a primary reason for provider selection. This is particularly important for private label users (60 per cent) and custom managed account users (53 per cent), reflecting the need for tailored strategies to reflect a practices’ investment philosophy,” Mr Tang says.

Portfolio performance ranks as another key factor for 47 per cent of advisers in selecting a managed account provider. Off-the-shelf managed accounts lead in this category, with 51 per cent of users prioritising providers with a strong performance track record.

The report also found that fees are a top concern for 55 per cent of off-the-shelf users, compared to 27 per cent for custom managed accounts and 26 per cent for private label solutions, highlighting cost considerations in selection of both provider and managed account type.

“With 84 per cent of practices expecting growth over the next two to five years, there is clear optimism about the future of the financial advice industry,” Mr Tang says.

“Managed account providers can help prompt further growth for advice practices by offering technology and tools that streamline investment operations, providing scalable investment management including portfolio creation, rebalancing, performance reporting and compliance oversight, and enabling advisers to maintain consistent investment solutions for clients, even when transitioning between licensees.”

Zenith is one of the first multi-asset managed account providers in Australia and has built significant expertise on the development and management of these investment structures.

“Our deep understanding of the Australian wealth industry means our managed account solutions are purpose-built to help advisers grow and streamline their businesses. This report highlights how, more broadly, managed accounts will become a key tool for advisers in 2025—driving greater efficiency and scale for advice practices, while also delivering increased transparency for investors,” Mr Tang says.

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Steven Tang

Zenith Investment Partners continues its managed account portfolio growth trajectory with the launch of several new managed account portfolios this quarter, including a suite tailored for recently onboarded advice clients, in addition to the roll-out of its Essentials portfolios on Insignia Expand.

The group’s growing, national managed account footprint incorporates the recent launch of several customised portfolios including for Finsec Partners in Adelaide.

Andrew Creaser, partner with FinSec Partners, said that he was pleased with the smooth transition to an outsourced model and is looking forward to the efficiency benefits delivered through Zenith’s customised portfolio.

“The decision to move to a customised managed account was a significant one for our business. We spent time building confidence in Zenith’s people managing the portfolio, their portfolio construction methodology and their tailored approach, ensuring it aligned with ours. The transition process to date has been very straight-forward and well supported,” he said.

Steven Tang, Zenith’s head of portfolio solutions, said the Essentials portfolios were launched on Insignia’s Expand platform in July and showcase their wealth of portfolio management experience and internal capabilities in fund research, manager selection and asset allocation, now to a broader range of advisers.

“The Essentials portfolios are designed to achieve their return objectives with lower risk across all markets and time frames, using a combination of active managed funds and lower cost options such as index funds,” Mr Tang said.

“Improving accessibility of our off-the-shelf portfolios has been a big driver of the expansion of our platform footprint and our public menu portfolios are now available across 10 platforms, making our range of portfolios widely accessible across major platforms,” he said.

Zenith currently manages $5.3 billion in client assets across both public menu and customised managed account portfolios.

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Ben Davis

Zenith Investment Partners (Zenith) has announced the return of one of its original partners and senior investment consultant, Ben Davis, to the business. The respected industry executive will return to Zenith on 1 May 2024, working alongside investment director and founding partner, David Wright, and head of portfolio solutions, Steven Tang, in the Portfolio Solutions team.

Zenith managing director, Jason Huddy, said Mr Davis’ role will add additional depth and considerable market experience to the team, and further support the growing adviser demand for Zenith’s managed account solutions.

“After taking 12 months away from the industry to explore personal interests, Ben’s passion for investing has been rekindled. For nearly 20 years Ben was a respected leader with Zenith and an important contributor to our service delivery to advisers. He is well known to many of our clients and we are pleased to welcome him back,” Mr Huddy said.

Mr Davis will be the primary consultant for a number of the Group’s customised managed account client businesses, adding to the breadth of market experience within the team and helping to drive the continued growth and evolution of Zenith’s managed account offering.

Mr Davis is returning to the business in a client-facing role – and says it is a part of the business he has missed.

“I’m genuinely excited about the growth and evolution of Zenith’s managed account offering over the last 12 months, so it’s a really interesting time to be joining the team.

“I obviously have very high regard for the broader Zenith business and the leadership team I’ll be working alongside. I’m really looking forward to supporting the portfolio solutions team in delivering its range of portfolios to their diverse and growing client base,” Mr Davis said.

Zenith has been providing managed account portfolios since 2016 and currently manages close to $5 billion in FUM across its range of managed accounts, including both customised and public menu portfolio options.

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Steven Tang

Share markets globally have largely shaken off higher interest rates this year with many companies relatively immune to higher credit costs. However, that could change if the world falls into recession, according to Zenith Investment Partners head of portfolio solutions, Steven Tang.

“So far, interest rate rises have had little impact on the economy and share markets, though they have impacted the bond market,” Mr Tang says.

“Earnings and economies have been resilient, and we attribute this to a reduction in interest rate exposure across companies and households following the easy monetary policy we had for so long, which allowed many companies and households to lock in low rates on their debt.

“However, higher interest rates could eventually start to bite. There are already emerging signs of stress in terms of highly leveraged households and slowing Australian economic growth,” he says.

“We expect that winners and losers will emerge as share market volatility increases, creating opportunities for active stock selection.

“Should we enter a recessionary environment, we expect higher quality companies to out-perform and we have therefore increased our exposure to quality focussed equity fund managers. As a consequence, our portfolios are well equipped to perform in a broad range of markets.”

While Mr Tang expects a soft economic landing, he says a more pronounced recession is a possibility, and that Australian firms were more vulnerable than US companies given higher inflation and a greater exposure to interest rates.

“Recessions are not good for equities as earnings usually take a hit, but the outcome can be varied depending on the depth of the recession and where it plays out the most,” Mr Tang says.

“Australia is more vulnerable to a recession, given the household sector is more leveraged and it has a higher exposure to variable interest rates. The central bank too has taken a more dovish approach to setting interest rates than in the US, where inflation has moderated more materially.

“Businesses that can generate sustainable cash flows and are able to internally fund their growth will gain an advantage over businesses that rely on external funding for their growth.

“With the recent market weakness, we are now seeing some asset classes that have previously been expensive now looking cheap. One of these is global small caps, which are priced for a more pessimistic outlook, which isn’t in our base case. They also look cheap relative to large caps. Similarly, valuations in some emerging markets are also looking more attractive as are interest rate sensitive sectors such as infrastructure.”

Meanwhile, Mr Tang says government bonds are also looking more attractive with investment returns of around 4 to 5 per cent, similar to cash investments. However, growth-focused, higher risk assets are essential for portfolio diversification and to generate meaningful returns over time.

“Bond yields are higher and accordingly, we have been progressively increasing exposure to high quality government bonds in our portfolios.

“But 4 to 5 per cent returns aren’t quite as good when inflation is running at 5 to 6 per cent. However, with equities, corporate profits can grow at the inflation rate, so the capital base is both protected and growing.”

Mr Tang says there are ample opportunities to generate attractive returns above cash and other low-risk investments when adopting a diversified approach to equity investing.

“While corporate profits can be a casualty of higher interest rates, high-quality equities remain a must for diversification and as a hedge against inflation. We favour high quality companies in a strong financial position where their debt is either longer dated or at comfortable levels.”

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Steven Tang

Investment portfolios should be more weighted towards quality companies to help weather current market uncertainty, according to Zenith Investment Partners head of portfolio solutions Steven Tang.

Mr Tang says a higher weighting to quality companies, that have better earnings potential and lower debt, is important in building robust portfolios in the current climate.

“While their valuations might look a bit more expensive, they are still reasonably priced, and they aren’t at the high prices we saw in 2021.”

Mr Tang says investors should also look to asset classes where recession risks have been better priced in.

“Small caps, particularly global small caps, haven’t really had a good run for most of this year, especially when compared to their large cap counterparts, but we believe they now present a good opportunity to add value.”

Meanwhile, Mr Tang says bonds are looking more attractive and says Zenith is incrementally allocating more bonds to its portfolios.

“Bonds are beginning to reflect fair value and are providing decent investment returns of around four-to-five per cent.

“If we enter a recessionary environment, assuming inflation comes down and central banks have the capacity to cut rates, bonds will be very beneficial to portfolios.”

As for sectors that investors should underweight, Mr Tang points to North American companies, more specifically the mega cap technology companies.

“The ‘magnificent seven’ tech stocks – Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia and Tesla – have been driving most of the returns in the US. For this reason, the decisions to underweight both North America and technology go hand in hand.”

Zenith head of allocation, Damien Hennessy, says returns from infrastructure and REITs have been hit hardest from the central banks’ recent ‘higher for longer’ approach to tame inflation.

“In the first half of 2023, global markets were ignoring higher interest rates and were more focused on improved cash flows and a global economy that was performing better than expected,” Mr Hennessy says.

“But over the past few months, the situation has changed as the market has now turned its attention to the risks the higher-for-longer interest rates and higher real yields present.”

Even as central banks keep interest rates higher for longer, Mr Hennessy notes that globally inflation has been declining much faster than expected over the past six months.

“UK inflation has gone down from a high of 11 per cent to 6.5 per cent, while US inflation has declined even further to 3.7 per cent. In Australia, it remains at around 5.5 per cent, down from its 30-year high of 7.8 per cent.

“But more importantly, if you look at underlying inflation, those numbers are annualising at a rate of slightly under 3 per cent. It’s good progress and certainly one that the central banks would be very happy with.

“Economies have performed stronger than expected up until now, but higher rates will eventually have an impact and economies should slow in 2024. If you consider that bond yields are around their peak, as long as the economy is not sliding into recession, then those assets that have been priced for even higher bond yields start to look more attractive.”

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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:

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.

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[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.

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Stephen Tang

Zenith Investment Partners has launched four new managed portfolio clients on the MyNorth platform and a new client on Macquarie Wrap, furthering the growth of its customised managed account client base amidst increasing adviser demand for managed accounts.

Steven Tang, head of consulting at Zenith, said there has been a significant increase in the interest and use of managed accounts over the past 12 months.

“When you consider the flexibility, transparency and convenience managed accounts offer both advisers and their clients, it’s easy to see why they are growing in popularity.

“Advisers are increasingly becoming more nuanced in terms of what they’re looking to offer clients – be it a focus on ESG or other bespoke client needs in portfolio construction – and managed accounts are very good at providing this flexibility.”

Cameron Dickson, Director of The Moreton Group, who worked with Zenith to develop a customised managed account on Macquarie Wrap, says that one of the many benefits that attracted his business to the structure was the removal of the associated administration burden.

“Zenith look after the implementation and reporting, including governance. This shift means our advisers are freed up to focus more on serving the client rather than back-end administration.”

Greg Major, General Manager at Blueprint Wealth whose portfolios are on MyNorth, said the portfolios have been constructed to cater to a wide variety of client risk profiles, ranging from conservative to high growth.

“Zenith is able to leverage its proprietary research knowledge to construct portfolios, and has a dedicated portfolio implementation team that monitors and executes the agreed portfolio changes efficiently. This attention to detail ensures our client’s best interests are looked after.”

Mr Tang added that COVID-19 had been a game changer for the take up of managed accounts.

“During the March 2020 market fall, when there were significant levels of draw-down by investors, advisers working with a managed accounts structure were able to rebalance all clients seamlessly and efficiently, including all the associated reporting. This result simply would not have been achievable with a model portfolio structure.”

“Over the next 12 months, the expectation is for even greater uptake in managed accounts, particularly as responsible investing continues to attract such a large volume of enquiries.”

In addition to its customised solutions, Zenith manages a range of publicly available managed accounts. The Zenith Essentials portfolios are available on the MyNorth, BT Panorama, Hub24 and Netwealth platforms. These portfolios provide exposure to a diversified range of quality active fund managers while lowering the overall portfolio cost through the inclusion of lower cost strategies.

Also available on MyNorth, BT Panorama and Hub24 are Zenith’s Elite Blends premium portfolio suite, leveraging its best insights into investment markets and strength in manager selection.

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Simone Bouch

Zenith Investment Partners has announced the roll-out of the MSCI BarraOne portfolio tool within its consulting business, further enhancing the delivery of institutional-grade portfolio analysis, service scalability, insights and reporting to its managed account portfolio clients.

Typically the domain of institutional investors, the MSCI BarraOne is a research-driven analytical platform that provides users with integrated risk and performance analytics and deeper visibility into the risk/return profile of investments.

Steven Tang, Zenith’s Head of Consulting, said the subscription will deliver greater global market insights into their client portfolios, at a faster pace, supporting the investment decision-making and implementation across multiple portfolios on behalf of their clients.

“Advisers are proactively looking for consulting relationships that can help better scale their ongoing service delivery to clients.

“The quality and breadth of analytics delivered by MSCI enables us to incorporate institutional-grade insights and ready reporting into our offering to advisers, further expanding our scaled service delivery to managed account clients,” Steven said.

Simone Bouch, MSCI’s Head of Australia and New Zealand Client Coverage, said “we’re pleased to collaborate with Zenith to bring this capability to the Australian retail investment market. The MSCI BarraOne platform is powered by state-of-the-art factor models across multi-asset classes and we’re delighted to work with Zenith as they expand the investment tools and services they offer clients.”

In further recognition of the importance of delivering analytics and insights to support the advice process, Zenith will soon launch its new Portfolio Builder tool to subscribers. The platform will enable advisers to design, maintain and compare client portfolios in a user-friendly format, providing important look-through analysis of exposures in equities, REITs and fixed income for individual funds and constructed portfolios.

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Shailesh Jain joins Zenith as a Senior Investment Consultant and will be primarily responsible for a number of the group’s client and platform relationships.  He joins the team from Lonsec where he was Deputy Head of Active Manager Research and Manager, Australian Equities.

Calvin Richardson and Martin Kofoed have both joined the team as Investment Consultants, with responsibility for client engagement and governance in support of Zenith’s expanding number of clients. Calvin joins the team from Lonsec and Martin from Pitcher Partners, each having significant experience in both financial markets and advice delivery to investors.

Head of Consulting, Steven Tang, said he was really pleased to welcome the new additions to the team and the caliber of consultants they’ve been able to attract.

“Zenith has been providing managed account services to advisers for over four years now and this year, our service delivery to advisers has ramped-up even further,” Steven said.

“Being able to closely track and quickly communicate financial market changes and fund manager insights to advisers, let alone support them to make timely and necessary changes to their managed account portfolios over recent months, has been critical for their service to clients. Expanding our team into this growing segment of the market is important for our ongoing service commitment to advisers and their clients,” he said.

Growing interest in Zenith’s managed account product suite has seen the group cement its position as a leading provider of managed portfolios in Australia. Blending the best of their proprietary research into both customised and public menu portfolios, the Group’s growing client list includes a number of leading boutique advice businesses across the country.

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Steven Tang

Several Fixed Income Managers will need to expand their current investment toolkit going forward according to Steven Tang, Senior Investment Analyst at Zenith investment Partners according to their 2014 Australian Fixed Income Sector review released last week.

Tang noted “one relatively simple and key way for active managers in the sector to outperform over recent years has been to overweight corporate debt (i.e. credit) in their portfolios”.

The spreads (margin over government bonds with equivalent maturities) on these instruments have narrowed aggressively due to the insatiable investor demand for income producing assets in a zero interest rate policy world.

Consequently, manager portfolios have benefited as prices have risen on these instruments. Whereas this environment has favoured managers with a credit orientation, spreads have tightened to such a degree now that the future may favour those with a more diverse skillset.

However, despite making this observation, Tang notes that managers continue to maintain a healthy overweight to credit in their portfolios, believing that it still offers value.

In a world of reduced market liquidity, Tang highlights that this poses potential challenges and risks for managers and hence investors.

While one primary way managers have attempted to address these risks is through their expanded use of credit derivatives, Tang cautions that they may not offer the panacea advertised in a large scale credit event, or in the face of large-scale fund redemptions.

Nevertheless, despite this cautionary tale Zenith believes that fixed income remains a crucial part of any medium to long term portfolio structure.

However, it is very important that investors understand the risks that are embedded in manager portfolios and seek managers that have ability to add value in different market environments.

Over the 12 months to 31 May 2014, the Australian fixed interest market, as represented by the UBS Composite Index (All Maturities), returned 4.14%.

From an initial universe of 78 Cash and Australian Fixed Interest funds reviewed in the report, 4 were rated “Highly Recommended”, 23 “Recommended”, 9 “Approved”, and 42 “Not Rated”.

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