“So those trends – partly regulatory, partly technology and partly investment-related – have led advisers to reposition themselves away from inefficient, conventional advice models and towards managed-account business models.” Knox said the new regulatory drive undermines the commercial appeal of platforms. Until now, there has been a lot of talk about managed accounts, but “the platform market has always had the upper hand of the debate because it makes payments back to advisers in return for simplicity of relationship”. The ability of managed accounts to create financial plans that are better customised to suit clients’ needs has resonated throughout the independent financial adviser market, said Thomas Bignill, managing director at independent investment and distribution business Mason Stevens, because it provides advisors with an opportunity to more fully showcase their skills in the changing distribution landscape. “The challenge for advisers will really be to show that they’re innovative, they’re going to offer points of differentiation,” he said. Mason Stevens is one of many financial services businesses using managed accounts to partner more closely with investment managers, while also using direct equities, to develop investment programs for clients. Price knock-down The investment losses experienced during the financial crisis forced both advisers and clients to pay closer attention to the high fees charged by managed funds on platforms. “What you can reasonably acknowledge is that the cost of platforms over the last 10 years has not gone down,” Knox said. “They’ve always been the same. All the owners of the platforms have argued that scale is a primary benefit and you need scale to survive. The observation I’ve made – countless times – is whatever scale is available goes straight back to the owner and doesn’t benefit the consumer.
The increased transparency and lower costs provided by managed accounts have not gone unnoticed by funds management sales forces, Ian Knox, managing director at Paragem, said. Some investment product providers and financial planning dealer groups have embraced this new way of selling funds. And while many people believe there will always be a place for platforms, managed account structures are beginning to steal the spotlight away from their dominant rivals. “More and more dealer groups and advisers that we talk to are coming to grips with the advantages of a managed account,” Knox said. “They’re looking at it so they can control their business better, lower their costs [and] provide greater transparency. Those factors are quite compelling.” Trending now Toby Potter, a managed account consultant and chairman of the Institute of Managed Account Providers (IMAP), said the medium-term trends influencing the development of managed accounts – and their popularity – have been more structural. He said: “The key drivers for managed accounts over the last 24 months have been the loss of confidence in managed funds as a result of the financial crisis, and the technology developments spurred by the emergence of new platforms like Hub24 and OneVue, which has had a flow-on effect to the mainstream platforms. “It’s also been supplemented by a growing interest in direct securities generally, as opposed to managed funds. That’s also seen in the increased investment in direct fixed interest through platforms as well as other vehicles.” These changes are occurring as the Future of Financial Advice (FoFA) reform package is forcing many financial advisers to rethink commissions- and volume rebatesdriven business models.
