Managed accounts allow financial planners to become ‘more professional’, according to Toby Potter, the chair of IMAP. They now represent almost 10 per cent of all the wholesale/retail money on platforms. They have now eclipsed ETFs in assets under management after a 28 per cent rise last year.

Not that the two are mutually exclusive. A lot of retail and wholesale investors use both vehicles. ETFs are cheap, easy and liquid. Managed accounts are not so cheap and not so easy, but they are very liquid. Retail (individual) investors love them because of the control they have over their assets.

In a webinar for members last week, IMAP (the Institute of Managed Accounts Professionals), constrained, like everyone, by the coronavirus, David Wright, a founder and chief executive of Zenith Partners, said it was no surprise that portfolios had become distorted by being overweight to defensive assets. Zenith recently entered the institutional market through the proposed purchase of the listed Chant West research firm.

“It’s not a trivial issue to talk about the potential for slippage and human error. It’s [execution] has been slower than normal due to the high volumes over the past few weeks but we have been able to get them through. There’s no way they could have executed those trades in that time frame if they weren’t in SMAs,” he said.

“We all need ongoing communication in these times. We need to tell investors what’s going on in their portfolios. The transparency in managed accounts is another reason they are much more efficient.”

He said that the managed accounts sector was not completely automated. With more people working from home during the current crisis there was also more room for mistakes. “We have seen a strong demand for lower-cost portfolios, and also for some ‘full octane’ portfolios,” he said. “There’s also a demand for dedicated retirement and drawdown options. We are seeing groups coming forward looking for bespoke retirement and drawdown portfolios.” But, Wright said, there were no free lunches. With ‘drawdown’ portfolios you won’t participate fully in the next market upturn.

From a fund manager’s perspective, managed accounts represented a more efficient business. “It’s not pure institutional, but it’s also not rats and mice like retail… About 10 per cent of managers have created a dedicated unit class for managed accounts. I think the availability of unit classes for lower-priced managed accounts will be the way of the future.”

He said that active managers tended to show their worth in times of market volatility and, luckily for him, demand for consulting and advisory service rose too. “The underperformance of active managers over the past few years, prior to this correction, is now changing… Historically, when you have panic like we have seen, all [investment] styles tend to suffer. But value tends to perform better as markets find some form of bottom, whenever that is.”

Toby Potter confirmed that ASIC had last week delayed its review of managed accounts, along with several other policy issues, as announced by the regulator because of the coronavirus. One wonders whether ‘working from home’ means actually working all that much.

Potter said: “There are very real benefits to clients from managed accounts during times like this because they are continually managed and have liquidity.”

– G.B.