Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 310

5 flexible features of Managed Accounts

About half of Cuffelinks readers engage the services of financial advisers to help them manage their life savings. Most will meet with their adviser, review their portfolio and then listen to their adviser’s recommended changes to these portfolios. This process of managing client money is old-fashioned, clunky and reactive. There is a better way.

Acceptance of Managed Accounts

Managed Accounts have been around for a while but over the last few years their popularity has soared, not only in Australia, but also in the UK and the US. There is good reason for this as the benefits of using Managed Accounts are significant and varied. According to the 2019 Netwealth Advice Tech Report, 43% of advice firms now use Managed Accounts to run part of their client portfolios, up from 35% in 2017. A recent IMAP/Milliman survey revealed that $62 billion of client funds are now managed via discretionary portfolio methods, double the level of just three years ago.

Source: IMAP Milliman

A Managed Account in its simplest form is an auto-rebalance tool. It permits the advice firm discretion to make changes to their clients’ portfolios without requiring their written approval. This is how superannuation monies are managed in industry and retail funds. The manager has strict limits on the amount of risk that can be taken and the type of assets that can be purchased, and must adhere to these limits.

The Managed Account benefits

Managed Accounts offer a range of benefits that offer clients and their advisers increased flexibility.

First, the money is managed by a professional investment committee, rather than by an adviser who occasionally reads the Fin Review and a stock-tipping sheet. While portfolio outperformance is not guaranteed, the likelihood of things going badly wrong are reduced.

Second, the client’s funds are managed in a much more proactive manner as portfolio changes can be made in an instant. Contrast this with the traditional process where changes were generally only made at the client meeting, which may happen just once or twice a year.

Third, Managed Accounts are more progressive and egalitarian than the traditional way of managing money. Currently, if changes need to be made, it’s inevitably the adviser’s larger clients who will be called first. With a Managed Account, all portfolios of the same risk profile are changed at the same time, which also offers scale benefits.

Fourth, Managed Accounts are transparent. Portfolio performance is published each month and is benchmarked against an equivalent risk profile. There is no hiding, obfuscation and evasiveness. “How are we doing?” is now easier to answer. We benchmark our clients' portfolios against their CPI+ targets and against a basket of comparable portfolios every month.

And fifth, with advisers freed from the tyranny of trying fruitlessly to add value by picking BHP over CBA, they can actually get on with the job of providing strategic financial planning advice, focussing on the clients' wealth plan and helping them achieve their important goals in life.

Sounds good so far.

Are there any disadvantages?

Yes. A Managed Account run by a professional investment committee will likely charge a portfolio fee. This is typically in the region of 0.2% - 0.3%, though lower rates are commonly offered for larger portfolios. This is an additional cost. However, most Managed Account providers are able to recoup most, if not all, of this cost in two ways.

First, by negotiating lower management expense ratios (MERs) from fund managers. With scale comes lower fees, and Managed Accounts offer scale. It’s important to check that your provider passes these rebates on to you, the client, in full. And second, many Managed Account providers are now offering lower financial advice fees if client portfolios are run in a discretionary manner, due to the reduced administrative burden.

It might be time to talk to your adviser about Managed Accounts. They are not suitable for everyone, but they are a big part of the future of advice.

 

Jonathan Hoyle is Chief Executive Officer at Stanford Brown. This article is general information and does not address the circumstances of any individual.

 

banner

Most viewed in recent weeks

Australian house prices close in on world record

Sydney is set to become the world’s most expensive city for housing over the next 12 months, a new report shows. Our other major cities aren’t far behind unless there are major changes to improve housing affordability.

The case for the $3 million super tax

The Government's proposed tax has copped a lot of flack though I think it's a reasonable approach to improve the long-term sustainability of superannuation and the retirement income system. Here’s why.

Tariffs are a smokescreen to Trump's real endgame

Behind market volatility and tariff threats lies a deeper strategy. Trump’s real goal isn’t trade reform but managing America's massive debts, preserving bond market confidence, and preparing for potential QE.

The super tax and the defined benefits scandal

Australia's superannuation inequities date back to poor decisions made by Parliament two decades ago. If super for the wealthy needs resetting, so too does the defined benefits schemes for our public servants.

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Getting rich vs staying rich

Strategies to get rich versus stay rich are markedly different. Here is a look at the five main ways to get rich, including through work, business, investing and luck, as well as those that preserve wealth.

Latest Updates

SMSF strategies

Meg on SMSFs: Withdrawing assets ahead of the $3m super tax

The super tax has caused an almighty scuffle, but for SMSFs impacted by the proposed tax, a big question remains: what should they do now? Here are ideas for those wanting to withdraw money from their SMSF.

Superannuation

The huge cost of super tax concessions

The current net annual cost of superannuation tax subsidies is around $40 billion, growing to more than $110 billion by 2060. These subsidies have always been bad policy, representing a waste of taxpayers' money.

Planning

How to avoid inheritance fights

Inspired by the papal conclave, this explores how families can avoid post-death drama through honest conversations, better planning, and trial runs - so there are no surprises when it really matters.

Superannuation

Super contribution splitting

Super contribution splitting allows couples to divide before-tax contributions to super between spouses, maximizing savings. It’s not for everyone, but in the right circumstances, it can be a smart strategy worth exploring.

Economy

Trump vs Powell: Who will blink first?

The US economy faces an unprecedented clash in leadership styles, but the President and Fed Chair could both take a lesson from the other. Not least because the fiscal and monetary authorities need to work together.

Gold

Credit cuts, rising risks, and the case for gold

Shares trade at steep valuations despite higher risks of a recession. Amid doubts that a 60/40 portfolio can still provide enough protection through times of market stress, gold's record shines bright.

Investment strategies

Buffett acolyte warns passive investors of mediocre future returns

While Chris Bloomstan doesn't have the track record of his hero, it's impressive nonetheless. And he's recently warned that today has uncanny resemblances to the 1990s tech bubble and US returns are likely to be disappointing.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.