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

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Managed Accounts A Business Solution

David Heather Head of Distribution Investment Administration Services

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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.

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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

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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

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• 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

Why Are Groups Using or Considering To Use Managed Accounts

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• 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

Why Are Groups Using or Considering To Use Managed Accounts

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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 ?

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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)

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Cash Portfolio Risk Profile Portfolios eg. Balanced Mandated Portfolios eg. Outsourced Australian Share Portfolio Tailored Portfolio

• eg. IMA

strategy

• r parcel

locking Asset Class Portfolios

• eg. Fixed

Interest (Bonds, TDs, Cash)

Controlling Portfolio Design

Your Portfolios or an Outsource Strategy

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Typical Ongoing Platform Costs Admin 50­80bps MER 75bps Adviser Fee 60­100bps Transaction Fee $30

Your Own Managed Account Service

Total 185­ 255bps

Administration Fee From 25bp Transaction and Brokerage Costs Depends on approach Investment Manager Fee Depends on approach Adviser Fee Dial up

Dealer controls cost to client

Control of Cost to Client

Dealer controls cost to client Dealer controls cost to client Dealer and adviser driven

Fees are excluding GST

Performance Fee Depends on approach

Dealer controls cost to client

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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

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Three Pillars of Scalable Portfolio Management

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Importance of Modeling Technology

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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 ?

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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

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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

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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

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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

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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 ?

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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

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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

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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