Investors are piling into managed accounts

The demand from investors and their professional advisers for separately managed investment accounts is expected to continue to increase.

That’s the view of key figures in Australia’s wealth landscape, with global asset managers State Street Global Advisors noting that the recent surge in demand for managed accounts points the way for investor demand in the coming years.

In a report released Friday, State Street Global Advisors revealed that a record amount of client cash is flowing into managed account products as financial advisors steer their clients into the management options.

Almost 25 percent of new customer inflows were locked into separately managed accounts, well up from the 4 percent recorded in 2015.

The shift comes as more advisers offer the products, with State Street Global Advisors noting that nearly every other in the sector offers the products.

This had led to a jump in funds under management, by $194.85 billion. now locked in managed funds products, up 146 percent over five years.

State Street Global Advisors vice president Sinead Schaffer said the asset manager had seen a boom in managers moving into growth strategies, amid a rapid recovery in stocks.

But she said this was about income strategies, reflecting a desire to take advantage of higher interest rates as well as a broader shift in the age of wealthy Australians increasingly retiring.

“We think this is only going to increase as the number of retirees in Australia sort of caters for that retirement phase of their lives,” Ms Schaffer said.

She said tax liabilities were also an important consideration for retirees, with the managed accounts allowing investors to control the underlying assets and structure their funds in such a way as to avoid tax events.

Separately managed accounts are investment options that allow investors to own underlying assets while sending their management to an advisor or professional investment manager.

Ms. Schaffer said advisers used the managed account products because they were more efficient and allowed them to focus on investing clients’ funds.

Ms. Schaffer said the managed account option was a sweet spot for investors with $100,000 up to nearly $1 million.

Investment Trends chief executive Eric Blewitt said the move to separately managed accounts came at the expense of unlisted managed funds.

He said this was likely because the diversity of investment opportunities on offer had grown, making accounting more attractive to investors.

Sir. Blewitt said the proposed financial advice reforms were likely to make it easier for millions of Australians to access financial advice.

He noted that a key barrier had been cost and complexity.

Sir. Blewitt said the data from the report suggested the likely winners from the reforms, with exchange-traded funds, index funds and managed accounts all likely to see inflows from investors.

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