Research shows SMA use at all-time high


By Julie May

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Following reports earlier this year that the availability of separately managed accounts (SMA) via platforms had increased dramatically throughout 2014, new research released yesterday showed the number of financial advisers in Australia using SMAs was also at an all-time high.

The “February 2015 JBWere/Investment Trends SMA Report” surveyed over 650 advisers, revealing 20 per cent were now using SMAs, while a further 23 per cent planned to start using them in the future.

Current SMA users also predicted 24 per cent of their funds under advice would be allocated to SMAs by 2018, compared to 13 per cent currently.

Meanwhile, just under 50 per cent of advisers said they were discouraged from using direct equities within their clients’ portfolios due to the work involved in monitoring individual stocks.

JBWere executive director and manager of financial intermediaries Andrew Tracy said the results indicated advisers were increasingly turning to SMAs to relieve administrative requirements.

“A growing number of clients are seeking the transparency of investing directly in shares, so for advisers this means monitoring individual stock activity and issuing statements of advice for multiple clients on a daily basis, all of which is not scalable as the business grows,” Tracy said.

“SMAs provide an efficient solution for advisers with these types of clients, allowing them to outsource the day-to-day management aspects of maintaining an equity portfolio while maintaining the transparency and simplicity that clients value in direct share investments.”

When asked why they recommended SMAs to their clients, 46 per cent of advisers nominated the fact they allowed clients to see the underlying shares in their portfolios, while 45 per cent said they were less of an administrative burden than direct shares, with 42 per cent indicating SMAs were an efficient way to access professional funds management.

In terms of barriers to use, availability on investment platforms was still a key consideration for advisers, with over 20 per cent of those currently recommending SMAs saying they were unavailable on their platform.

“We’ve made significant progress on this in the past year, with 4 platforms adding SMAs to their offering, allowing 25 per cent of planners to now have access to SMAs on their primary platform,” Tracy said, adding the total number of platforms with SMA functionality was now sitting at 11.

Meanwhile, advisers who had not used SMAs before were more likely to cite an education gap as their key barrier to using SMAs, he said, with over 40 per cent saying they did not know enough about them.

The report also showed that over 50 per cent of advisers who were considering using SMAs would like them to be cost-effective for their low-balance clients.

Advisers were also beginning to note potential in SMAs beyond the Australian equity space, with almost 70 per cent of potential SMA users saying they would like to have access to an international equity SMA, while 41 per cent wanted access to a fixed income/hybrid securities SMA, with 45 per cent interested in accessing a multi-asset SMA.

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