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

Which generation had it toughest?

Each generation believes its economic challenges were uniquely tough - but what does the data say? A closer look reveals a more nuanced, complex story behind the generational hardship debate. 

Maybe it’s time to consider taxing the family home

Australia could unlock smarter investment and greater equity by reforming housing tax concessions. Rethinking exemptions on the family home could benefit most Australians, especially renters and owners of modest homes.

The best way to get rich and retire early

This goes through the different options including shares, property and business ownership and declares a winner, as well as outlining the mindset needed to earn enough to never have to work again.

A perfect storm for housing affordability in Australia

Everyone has a theory as to why housing in Australia is so expensive. There are a lot of different factors at play, from skewed migration patterns to banking trends and housing's status as a national obsession.

Supercharging the ‘4% rule’ to ensure a richer retirement

The creator of the 4% rule for retirement withdrawals, Bill Bengen, has written a new book outlining fresh strategies to outlive your money, including holding fewer stocks in early retirement before increasing allocations.

Simple maths says the AI investment boom ends badly

This AI cycle feels less like a revolution and more like a rerun. Just like fibre in 2000, shale in 2014, and cannabis in 2019, the technology or product is real but the capital cycle will be brutal. Investors beware.

Latest Updates

Weekly Editorial

Welcome to Firstlinks Edition 628

Australian investors have been pouring money into US stocks this year, just as they start to underperform the rest of the world. Is this a sign of things to come? This looks at 50 years of data to see what happens next.

  • 11 September 2025
Exchange traded products

Are LICs licked?

LICs are continuing to struggle with large discounts and frustrated investors are wondering whether it’s worth holding onto them. This explains why the next 6-12 months will be make or break for many LICs.

Retirement

We need a better scheme to help superannuation victims

The Compensation Scheme of Last Resort fails families hit by First Guardian and Shield losses, as well as advisers who are being wrongly blamed for the saga. It’s time for a fair, faster, universal super levy solution.

Investment strategies

5 charts every retiree must see…

Retirement can be daunting for Australians facing financial uncertainty. Understand your goals, longevity challenges, inflation impacts, market risks, and components of retirement income with these crucial charts.

Economy

How bread vs rice moulded history

Does a country's staple crop decide elements of its destiny? The second order effects of being a wheat or rice growing country could explain big differences in culture, societal norms and economic development.

Investment strategies

Small caps are catching fire - for good reason

Small caps just crashed the party like John McClane did in the movie, Die Hard - August delivered explosive gains. With valuations at historic lows, long-term investors could be set for a sequel worth watching.

Defensive growth for an age of deglobalisation, debt and disorder

Today’s new world order appears likely to lead to a lower return, higher risk investment environment. But this asset class looks especially well placed to survive, thrive, and deliver attractive returns to investors.

Economy

Will we choose a four-day working week?

The allure of a four-day week reflects a yearning for more balance in our lives. Yet the reliability of studies touting a lift in productivity is questionable and society may not be ready for such a shift anyway.

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.