However, OneVue’s McKeage says the recent launch of diversified mandates by specialist managers such as Proactive Portfolios extends the managed account structure to a broader range of listed investments, such as exchange-traded funds and listed investment companies, with direct international equities to come. Other managers also offer fixed income and listed property funds through SMAs. Some internationally focused accounts are offered in Australia, says AMP’s Sainsbury, but these are usually accessed by ultra highnet- worth investors. Creating an appropriately diversified international share portfolio can require a large number of stocks (most international managed funds hold over 150 different shares), and “replicating this for the average HNW investor could prove costly due to the trading and custody costs involved in administering the portfolio,” he says. “For this reason, managed funds are seen as offering a more efficient investment solution for international share exposure.” SMAs also draw criticism for being too concentrated. But this is the nature of the product, says Langlands at BlackRock.

“It’s true that SMA portfolios tend to be more concentrated, and this is largely based on feedback from advisers and clients: they would prefer more concentrated portfolios if the underlying shares are going to be beneficially owned by clients.” Taxing issues The need to source timely tax advice, based on an investor’s own tax position, is an integral part of the whole advice and investment experience, says McKeage. So OneVue has integrated its SMA with its UMA, made possible by double-entry accounting and BGL’s Simple Fund software. “Collectively, this ensures the investor’s personal tax position within their SMA and other investments can be accessed and reported, enabling their advisers to provide timely tax advice,” says McKeage.

Technology also helps BlackRock in the SMA space, says Langlands, enabling it to manage CGT distributions more easily, including realised, tax-free and tax-deferred treatments of CGT on shares. With the exception of listed property securities, data about stocks is available from the previous day’s close of business, so clients’ tax positions can be seen instantly. Langlands says tax parcel accounting can also be automated, as most SMAs link with accounting systems. As a result, there is a negligible additional investment required by the adviser, accountant or client – in terms of time or expense – to offer this tax effectiveness. He says BlackRock can provide CGT tax parcel reports in a few minutes for any date range – “a task we’ve estimated could normally take from three to five hours to complete.” Blind Fredd y says… Praemium’s inimitable Arthur Naoumidis has the last word when he opines: “Blind Freddy can see that an SMA is better than a managed fund on a wrap. SMAs are a cheaper, more tax-efficient and engaging investment platform than the old managed funds.”

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