Kathleen Gallagher

State Street Global Advisors, the asset management business of State Street Corporation (NYSE: STT), today released the results of its Model Portfolios: Adaptive Solutions for Advisory Growth research, revealing investor awareness and allocation of assets into model portfolios is on the rise in Australia.

Two-thirds (67%) of Australians are aware of model portfolios now, compared with just 47 per cent in 2019. With awareness of models rising, so too is the proportion of investors who have assets in this investment vehicle through their financial advisers. Among those who are aware of models, over half report having assets managed within model portfolios.

Model portfolios are a collection of assets – including ETFs, stocks and bonds – that are continuously managed by investment managers. These portfolios employ a diversified investment approach to achieve a specific balance of return and risk, or to meet a particular portfolio objective. Typically, Australian investors access model portfolios through managed accounts.

State Street Global Advisors’ Head of Model Portfolios EMEA and APAC, Kathleen Gallagher, says: “With more than half of Australian financial advisers now using managed accounts^[1], it’s great to see the benefits are transcending to investors. As many Australians face the cost of living crunch, investors say lower fees is a key benefits of having their assets in model portfolios. Also it is not surprising that that our research found 73 per cent of investors who have assets in models were satisfied with the fees for value of services, while only to 55 per cent of non-model portfolio investors said they felt satisfied with their fee structure. ”

On surveying investors on their views towards working with financial advisers, State Street Global Advisors’ survey found that 74 per cent of Australian investors want more personalised advice from their adviser that covers a comprehensive view of their financial priorities.

This view was reflected among investors when asked what they saw as the key benefits of their adviser having their assets in model portfolios. An equal 87 per cent of Australian investors see their portfolio being monitored more closely than if it was made and managed by their adviser, and getting more of their adviser’s time as the top benefits.

State Street Global Advisors’ Head of Intermediary, Australia, Tim Bradbury, says: “Australians are expecting their advisers to take a more holistic approach to deliver comprehensive, personalised financial advice that includes planning for life goals, accumulation, income, tax efficiency and risk management. Advisers that use managed accounts have reported that they, or their support staff, save on average 22.8 hours per week.¹ Model portfolios empower advisers to optimise their time, allowing them to focus on providing holistic guidance which is the most important to their clients. Advisers are creating additional efficiencies through providing model portfolios to their clients on investment platforms. The powerful combination of this technology coupled with model portfolios is a key evolution in providing investment solutions and advice cost-efficiently.”

Ms. Gallagher concludes: “Model portfolios are transforming the way financial advisers in Australia serve their clients. By leveraging ETFs as building blocks, financial advisers are now offering ready-made solutions that fully optimise portfolio management and compliance work – similar to providing the cake for investors, rather than just the ingredients. This approach not only provides meaningful and efficient investment strategies, but also means financial advisers can spend more time on what matters most – building stronger client relationships.”

The research, based on a survey of 250 Australian who work with a financial adviser and have investable assets of USD500,000 (around AUD782,750), aims to better understand views and expectations around model portfolios.

State Street Global Advisors officially launched its ETF Model Portfolio capability in the Australian market in 2019. Today, it offers six model portfolios across the risk spectrum and target income strategy.

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Notes:
[1] Source: SPDR ETFs / Investment Trends 2024 Managed Accounts Report, March 2024 

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As the creator of the world’s first ETFs^[1], State Street Global Advisors is committed to making investment opportunities more accessible with institutional- quality investments at a competitive price. State Street Global Advisors is the third largest global ETF provider^[2] with approximately US$1.5 trillion in total ETF assets globally^[3], with 17 ETFs available on the Australian Securities Exchange (ASX).

The SPDR^® S&P^®/ASX 200 Fund (STW) was upgraded to a “Highly Recommended” rating by Lonsec, noted strong conviction in the fund’s cost-effective passive exposure to the broader Australian equity market. Lonsec also highlighted the fund’s significant scale at $4.88 billion and high liquidity, along with its long-term record of tracking its underlying index.

The SPDR^® S&P^®/ASX 50 Fund (SFY) was upgraded to a “Recommended” rating due to its competitive fee of 0.2% per annum. This ETF offers investors a cost-effective and liquid means to gain index exposure to the 50 largest stocks by market capitalisation on the ASX.

The SPDR^® S&P^®/ASX 200 Listed Property Fund (SLF) was upgraded to a “Recommended” rating, also due to its fee reduction from 0.4% to 0.16% per annum in July 2024, resulting in its annual fees and cost being the lowest in its peer group, offering an efficient means of passive exposure to listed Australian property securities.

Lonsec assigned a “Recommend” rating to State Street Gold Fund, which was launched in July 2024. Lonsec said that the Fund offers a cost-effective means of gaining exposure to gold prices without requiring investors to hold, trade, or store physical gold bullion. Another strength of the Fund is that its annual fees and cost is priced favourably against its peer group.

State Street Global Advisors Head of Intermediary Business for Australia Tim Bradbury says: “We are pleased to receive such recognition of our funds from Lonsec. Furthermore it is exciting to see increasing numbers of Australian financial advisers using low-cost ETFs as key building blocks in their client portfolios – in line with advisers in other markets around the globe.”

State Street Global Advisors Head of Investments for Australia Jonathan Shead says: “The recognition is a mark of confidence in the capability and track record of our local ETF team. Our Australian-based portfolio managers also leverage the expertise and knowledge of over 70 investment professionals across the globe, with an average of 21 years of experience.”

Investment in Australian exchange traded products (ETPs) surged in 2024 to reach $225 billion in Funds Under Management, representing a nearly 4-fold increase in market size over the last five years^[4].

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Footnotes:
[1] ETFs managed by State Street Global Advisors have the oldest inception dates within the US, Hong Kong, Australia, and Singapore. State Street Global Advisors launched the first ETF in the US on January 22, 1993; launched the first ETF in Hong Kong on November 11, 1999; launched the first ETF in Australia on August 24, 2001; and launched the first ETF in Singapore on April 11, 2002.
[2] Source: Source: Pensions & Investments Research Center, as of December 31, 2023. Updated annually.
[3] Source: Morningstar Direct as of 30 September 2024
[4] Source: ASX, as of October 31, 2024

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