Understanding & Selecting Managed Account Services - Part B

In part A of this article (available on the Philo website) we provided an overview of the key characteristics of managed accounts and the different forms of managed accounts in the market. In this article we pose some questions that, when answered, should assist planning firms to select the right managed account for them. We also provide a link to Part B of our detailed paper called Understanding and Selecting Managed accounts. The detailed paper provides more education on the legal framework surrounding managed accounts and identifies scenarios where managed accounts and unit trusts can complement each other.

Choosing the right managed account for your business

The managed account solution you ultimately select for your business should support your business strategy.

For most businesses, their strategy regarding the investment value proposition they would like to offer their clients, and how they would like to charge for that, is still evolving. Some key questions that might assist planning firms to clarify their strategic objectives as a precursor to evaluating the merit of differing managed account service providers is set out below. Each of these questions is expanded upon in our more detailed paper available via this link.

  1. How well is your business scaling? Are you becoming increasingly profitable as you grow or are costs growing in line with revenue? How motivated are you to explore ways to enhance profitability? Are you willing to make changes to your business in pursuit of higher profitability and improved client service?
  2. What business are you (the financial planning business) in? What is the key value add your business offers its clients today and on what basis do you wish to compete in the future?
  3. How do you think your clients would rate your firm on investment capability? Are you retaining clients by innovating and surprising them on the upside, or are you relying on relationships and investor inertia?
  4. If you found yourself competing for a prospect with another firm with a very strong value proposition around investment management, would you be confident in winning the prospect?
  5. How clear is the investment philosophy of your business? Are you in a position to provide clients with clear messages in this regard that you can live and die by? Do you need assistance with clarifying / distilling your beliefs and aligning your investment activities to them?
  6. What scope of investment services do you wish to offer? For example some financial planning practices in the United States no longer use active fund managers. Would you do this in your business? Alternatively, some practices have a strong preference to be able to offer direct security portfolios. Is that important to you?
  7. Does your business aim to have reasonable consistency in client service and advice or are you comfortable that each adviser should be the main decision maker and influence on what the client experience will be?
  8. How often would you like client portfolios to be reviewed and adjusted in an ideal world?
  9. What level of portfolio customisation would your clients require?
  10. What proportion of your client base is below say $100k in size?
  11. Does your business currently pursue or is it planning to pursue, objectives based planning?
  12. Is your firm or your dealer (where applicable) likely to obtain MDA operator authorisation on your AFSL?
  13. How good is your fee structure at aligning interests with your clients? Do you have particular goals regarding strength of alignment? Have you considered your fee structure options and which ones will be most acceptable to your clients?
  14. Do you need assistance with creating a new revenue stream for portfolio management at the time you introduce managed accounts to your clients? Do you need assistance with structuring your future pricing?
  15. How far do you want these alignment principles to extend to your managed account and platform providers? i.e. how do you feel about platforms clipping the ticket on trades, only offering related party broking services, collecting fees on IPO's accessible through them etc? Can you tolerate these practises or are all / some of them a show stopper?
  16. How much operational risk are you willing to bear in your business?
  17. How much retail superannuation business do you do / intend to do?

The best managed account providers, like Philo Capital Advisers, can provide you with significant assistance to address these sorts of questions.

For more information

If you would like to further develop your knowledge of managed accounts, or if you would simply like to read a more extensive description of the issues raised in the questions above, you may like to read our more detailed paper entitled Understanding & Selecting Managed Accounts – Part B, a copy of which can be obtained from the Philo website by clicking here.


© Copyright: Philo Capital Advisers Pty Ltd 2014. No part of this publication may be reproduced by any process without prior written permission of the authors.


This article has been prepared by Philo Capital Advisers Pty Ltd ABN 70 119 185 974 AFSL 301808 (Philo) and contains general investment advice only. The information in this article does not take account of your objectives, financial situation or needs or those of your client. Before acting on this information readers should consider whether it is appropriate to their situation. We recommend obtaining financial, legal and taxation advice before making any financial investment decision. To the extent permitted by law, neither Philo nor any of its related entities accepts any responsibility for errors or misstatements of any nature, irrespective of how these may arise, nor will it be liable for any loss or damage suffered as a result of any reliance on the information included in this article. The information in this article is based on information obtained from sources believed to be reliable and accurate at the time of publication but we do not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice. Past performance is not a reliable indicator of future performance. Any forecasts included in this article are predictive in character and may be affected by incorrect assumptions or by known or unknown risks and uncertainties. Nothing in this article shall be construed as a solicitation to make a financial investment.