Managed Accounts A Business Solution David Heather Head of - PowerPoint PPT Presentation

Managed Accounts A Business Solution David Heather Head of Distribution Investment Administration Services Proudly sponsored by:

Disclaimer This information is unsolicited general information only for licensed dealers and advisers. None of the information contained herein is to be taken as personal financial product advice. In preparing this information, Investment Administration Services Pty Ltd has not taken into account any individual investor’s objectives, tax and financial situation or particular needs. Before making any decision based on the information herein, investors should consider the appropriateness of any investment vehicle relevant to their own personal objectives, financial situation and needs. Investors should seek professional advice and read all relevant Product Disclosure Statements and/or other relevant documents before investing. Proudly sponsored by:

Agenda • How to differentiate your business from your competitors • Maximising efficiencies in portfolio management • Examining what fee models are available and how to extract the correct margin for your business • Servicing SMSFs Proudly sponsored by:

Definition and Role of a Managed Account • Discretionary portfolio service • Integration of advice, investment management and administration into a “service” • Mandate management across risk profiles, asset classes and investment structures Proudly sponsored by:

Why Are Groups Using or Considering To Use Managed Accounts • Fees versus commissions argument – repositioning dealers around a fee for service based business model with the dealer being the manufacturer • Margin Pressures – extraction of greater margin for the dealer from existing processes and relationships to counter FoFA reforms • Control over Service definition – dealer desire to be the manufacturer and thus and control portfolio management approaches, branding and cost to client Proudly sponsored by:

Why Are Groups Using or Considering To Use Managed Accounts • Practice efficiency – creating a scalable business to support direct securities with little or no increases in cost • Global Financial Crisis has altered client confidence levels – repositioning businesses around a new business model that enables investment decisions to be acted upon quickly where market conditions dictate • SMSFs Growth – need to support a direct security portfolio management approach to meet SMSF requirements of lower cost and transparency Proudly sponsored by:

Understanding Your Requirements • Portfolio management – part of a client’s portfolio or the client’s total portfolio, types of assets, manage your own portfolios or use of external managers or a combination • Clients – meeting individual client circumstances • Fees – how does the client see your role and how do you see your role strategically • Brand – yours or someone else’s, if yours, to what extent ? Proudly sponsored by:

Differentiating Your Business • Make sure you are owning the service definition including definition of portfolios, managers and final pricing to client – so work with providers who enable you to achieve this • Make sure you are negotiating with fund managers directly if you can with your provider of choice • Potential for IFAs to achieve sharper mandate pricing from fund managers (no RE, registry, custody, unit pricing, distribution, shelf fees, rebates as against managed funds) Proudly sponsored by:

Controlling Portfolio Design Your Portfolios or an Outsource Strategy Asset Mandated Class Tailored Risk Portfolios Portfolios Portfolio Cash Profile eg. eg. Fixed eg. IMA Portfolio Portfolios Outsourced Interest strategy eg. Australian (Bonds, or parcel Balanced Share TDs, locking Portfolio Cash) Proudly sponsored by:

Control of Cost to Client Your Own Managed Account Typical Ongoing Platform Costs Service Admin Administration Fee Dealer controls 50­80bps From 25bp cost to client Investment Manager Fee Dealer controls MER 75bps Depends on approach cost to client Total Adviser Fee 185­ Dealer and Adviser Fee 255bps Dial up adviser driven 60­100bps Transaction and Brokerage Costs Dealer controls Transaction Depends on approach cost to client Fee $30 Performance Fee Dealer controls cost to client Depends on approach Proudly sponsored by: Fees are excluding GST

Branding Approach • Portfolios in your brand if you desire or perhaps establish a separate AFSL for your portfolio management activity • Marketing and disclosure documentation in your brand including application form and all client correspondence • Website and reporting in your brand fully integrated into your own website Proudly sponsored by:

Three Pillars of Scalable Portfolio Management Proudly sponsored by:

Importance of Modeling Technology Proudly sponsored by:

Portfolio Management Considerations • Model approach – money in today is fully invested tomorrow ? • Model based vs client tilts – trade off between maximum efficiency and client outcomes • Asset coverage – does your modeling tool and provider support all of the assets you intend to run through client portfolios • Execution – who does this and who should do it ? Proudly sponsored by:

Portfolio Management Considerations • Corporate actions – are they all available to you or your investment managers ? • Corporate actions – are decisions made across all investors or can you take into account individual client circumstances • Voting – is this important to you now and in the future Proudly sponsored by:

Fee Models – no one size fits all • Driven by the compliance regime behind the offer you are using • Consistent approach across investors through a PDS, client contractual based approach through MDA providing for variable pricing • PDS based approach typically has an administration fee, investment management fee, performance fee and adviser fee identification • Rolled up fees common in MDA – not possible through a PDS Proudly sponsored by: •

Fee Models – no one size fits all • Administration fees accessible from quality providers is as low as 25bp • Outsourced portfolio management accessible from as low as 40bp if you want to outsource • If already managing part or all of clients portfolio today, why outsource ? Convert to a portfolio management fee model ? • FoFA considerations Proudly sponsored by:

Fee Models – no one size fits all To extract greatest margin… Select a provider that meets your requirements, enables you to control the Service definition and thus enable you to control the investment manager margin and total cost to client Proudly sponsored by:

Supporting a SMSF Solution • Segregated accounts – ability to run multiple member strategies within a single account structure • Flexible Portfolio design to support specific strategies for SMSF’s particularly Pension clients • Super administration integration – to achieve end to end integration to the Administrator and Accountant • Audit simplification – GS007 audit certificates • RITC – is it claimed and who gets the benefit ? Proudly sponsored by:

Not Just a SMSF and Investment Solution • Super Managed Account capability in place • Partnership approach with Administrator and Trustee • PDS requirement but same investment approach as SMSF and Investment • Delivery of SMSF like investment outcomes to members with larger balances Proudly sponsored by:

Summary • Managed accounts can be a total business solution not just another product • You can differentiate your business from your competitors, even without your own MDA authorisation ­ understand your requirements and match these up to the options available to you • Three pillars of portfolio management ­ portfolio management should not be a one size fits all if you can avoid it Proudly sponsored by:

Summary • Range of models but fees are driven by the compliance regime underpinning your offer • FoFA impacts are lessened through the right managed account solution • Use managed accounts to drive additional efficiency and functionality into the delivery of SMSF’s Proudly sponsored by: