One of the big reasons that managed accounts have become so popular with investors and advisers is their simplicity.

That doesn’t mean that managed accounts are simple. They’re actually very complex structures supported by a team of investment specialists and sophisticated reporting and portfolio management systems.

But for advisers and their clients, managed accounts really do simplify so many aspects of investment.

More time for advisers

At Elston we’ve noticed that often within just a few months of adopting managed accounts, advisers generally start to notice how much time they’re saving. Without having to get involved with portfolio management and ROAs, they can save up to 17.1 hours each week.* That’s almost two extra days!

Imagine what you could do with that extra time. It could really help you to spend less time working in the business, and more time working on the business; strengthening existing client relationships and reaching out to new opportunities.

“It removed the requirement for me to be an investment adviser, and freed me from the paper warfare so I could spend more time with my clients.”

Peter Giblett, Cardinal Financial Services

More transparency for clients

Managed accounts, particularly those that incorporate direct assets, give investors the ability to see where their capital is invested. It’s an empowering feature, especially when compared to the more opaque unit trust and master trust structures.

Many clients like being able to see how their capital is invested. Especially when it’s invested in businesses that they know. For example, having shares in companies that are household names is reassuring, because they have seen businesses like these weather challenges in the past, and to grow and be profitable over the long term.

The important thing to also ensure is that investment communications are shared regularly with clients. This will provide investors with a rationale for a sale or purchase within a portfolio. When the messaging is clear and well presented, investor questions are often answered before they’re even asked. It’s a proactive approach to communication that puts advisers on the front foot and relieves the need for one-on-one explanation.

To help advisers manage this, Elston has developed “real time” communications to provide advisers with portfolio updates via SMS and video within 48hrs of an investment decision.

“We pride ourselves on not just the speed of our communications, but also the quality of information we provide. Elston has an adviser resource centre that’s packed with videos and articles that advisers can share with their clients.”

Mark Smith, Elston’s Head of Adviser Services

Finding tax efficiencies is often simpler

When the first managed accounts were created, it was to essentially “de-unitise” managed funds to deliver more transparency, and potential tax efficiencies through direct asset ownership.

At Elston we believe that SMAs should aim to maximise the after-tax outcome for investors by, where possible, observing 45-day holding rules for franking credit eligibility and 12 months CGT discount rules when considering portfolio changes.

Another key feature of managed accounts, which is often overlooked, is the ability to transfer assets in specie between risk-based managed account models without having to “cash out” of more traditional unitised investments. This can potentially deliver significant tax savings for clients over the course of their lifetime as they move up and down the risk spectrum.

The harmony of shared philosophies

Managed accounts are a great structure. But it’s important to think about your practices’ investment philosophy and approach, and how this is currently articulated to clients. Whether you go down a publicly available managed portfolio vs a tailored/customised managed portfolio approach, you’ll want the managed account solution you adopt to compliment and reinforce this investment philosophy.

Elston has had the same investment philosophy in place for over 11 years. It’s a philosophy that is unwavering, sensible and easily articulated to clients. To learn more about the philosophy, and to see how closely our beliefs may align with yours, watch this video.

Introducing the concept to clients

For some clients, the introduction to managed accounts happens quickly. For others it’s more of a journey.

Managed accounts are not for everyone and there will be some clients that the managed accounts are not suitable for, particularly if the heightened transparency causes unnecessary anxiety or those clients that don’t like handing over control of their investment decisions.

We work with practices who incorporate educational video content to explain to clients not only the concept of the managed portfolios but also to position the role of the external manager or consultant involved in the running of the managed portfolio. Depending on the review cycle frequency, some advisers like to start by introducing the concept to clients in meetings or via client newsletters, before more formally introducing the managed portfolio offering in annual client reviews.

Planning for a simple transition

Moving to Elston managed accounts can be simple, if you plan it out. For advisers who’ve been more focused on investment than strategic advice, it might feel a bit like they’re handing over the keys to the car. But in reality, they’re almost taking on the role of Chief Investment Officer for their clients. They will be able to work closely with external investment experts to bring an institutional level of investment management to their retail practice. They’ll also have access to an experienced managed portfolio specialist BDM. This is invaluable, particularly for sharing best practice and helping to negotiate any speedhumps and roadblocks.

Elston has been working with managed accounts for over a decade and we believe they are a fantastic investment vehicle. However, we always make it clear that they’re not a silver bullet. They can’t solve every challenge in a practice. But if implemented successfully they’ll add value in terms of client engagement, investment efficiency and hopefully investment outcomes.

Elston embraced managed accounts many years ago

Given the recent proliferation in managed accounts, it is often difficult to assess these new arrivals beyond the short term. It can also be common for some providers to spruik short-term performance numbers without demonstrating how much of that performance was delivered by skill or the market, or how much risk was taken on to achieve those results.

At Elston we have a track record that spans 11+ years. This means that we are able to show how our long-term approach to investing has delivered performance over a long time frame, through good times and bad.

We always encourage advisers to look deeper and get a more complete picture as they make their assessment. It’s good to understand what we refer to as the 5Ps. The People managing the investments; the Philosophy behind how they manage clients’ capital; the Policies that provide the framework for how capital is invested, and finally the Process (and how disciplined and repeatable it is). If you can get these 4Ps right, it should lead to the 5th P…. Performance.

It’s also worth looking into the experience of the manager within a managed account structure.

Having extensive experience in running individually managed accounts or IMAs, Elston has built a deep understanding of the nuances of portfolio execution and rebalancing across the various portfolio platforms, particularly with regard to managing direct equities within a diversified managed account.

Like to know more? It’s simple.

If you’d like to know more about managed accounts, talk to Mark Smith and the team, at Elston. Just phone 07 3002 3855 or email hello@elston.com.au

*Source: Investment Trends Managed Accounts Report: 2023 Trends, Usage and What’s Next (ssga.com)

If you would like more information, please call 1300 ELSTON or contact us.