SMA interest at three-year high


By Julie May

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Related Articles: Banks to weigh up own brand SMAs | |

Adviser interest in separately managed accounts (SMA) is greater than it has been for years, with Investment Trends revealing the industry has not experienced interest levels this high since 2011.

In an interview with financialobserver, Investment Trends senior analyst Recep Peker said the research firm had surveyed around 500 advisers in March and that segment proportionately represented independent and institutionally aligned advisers in the financial planning sector.

“Planners using SMAs or planning to do so said they liked SMAs because they were transparent [in terms of managers’ portfolio decisions] and because there was less administration and compliance work required,” Peker said, adding many pointed to greater advantages than what was offered by traditional managed funds and direct shares.

“The challenge with SMAs is that they are not readily available on all platforms, so that is one of the key factors holding back the SMA market.”

He said having to access an additional administration solution to access SMAs did create issues for advisers wanting to use them.

“In saying that, we are seeing more and more platform providers adding SMA options, with a number of big wraps adding functionality over the last year,” he said.

“An increasing number of planners and dealer groups are considering SMAs if they’re not using them already and where there is demand, platforms will certainly move to meet that.”

He said taking into account that demand for SMAs was the highest it had been since 2011, it was clear more advisory groups and providers were paying attention.

“After 2011, investor confidence decreased so there was favouritism towards using cash and term deposits, but that’s really turned around,” he said.

“There is also greater emphasis on transparency in the current environment, so SMAs are ideal in that respect because they provide a clearer picture as to where money is being held.

“Another thing that really resonates with clients right now is diversification and investors are really prioritising this within their portfolios.”

He said in a post Future of Financial Advice world, opportunities existed for SMA providers, highlighting that about 20 per cent of advisers were recommending SMAs currently, with that number only set to increase as a result of further interest and a higher number of interested parties.

“There is greater product choice these days, which means there is also a greater ability to differentiate adviser propositions,” he said.

When financialobserver spoke to Lonsec investment analyst Peter Green recently, he also indicated a number of banks might opt to offer their own SMA model portfolios to avoid diluting their existing product suites and losing market share.

“When it comes to offering SMAs, you could argue that there’s a potential conflict of interest for the bank-affiliated platforms, as the banks want to offer their own managed funds,” Green said at the time.

“In that respect, opening up to various SMA investment managers could dilute their existing product suite, which in turn could lead them to creating their own SMAs.”

He said investors were interested as SMAs enabled them to see the stocks they held in their portfolios, so they offered transparency as well as tax benefits.

Further, Macquarie announced the launch of SMAs as an investment option via its Macquarie Wrap platform in September.

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