SMAs the key to keeping SMSFs on platform

For many years, proponents of Separately Managed Accounts (SMAs) have exclaimed their virtues for servicing the investment needs of advised self-managed superannuation funds (SMSFs).  SMAs provide financial advisers the ability to generate administrative efficiency in managing multiple client portfolios in return for trading off some of the tailoring afforded by bespoke direct share portfolios, without sacrificing client ownership of underlying assets.  The result is a happy compromise where advisers can still offer clients the investment transparency and control that presumably led them down the SMSF path in the first place, but avoid the operational complexity and burden that comes from tracking, trading and researching multiple portfolios for multiple clients.

Findings from Tria’s Australian Adviser Insights Programme certainly support the popularity of using managed accounts for SMSF clients.  Those advisers whose practices focus on SMSF clients (i.e. SMSFs comprise 50% or more of clients) allocate on average 20% of their FUA via SMAs, while non-SMSF focused advisers on average only allocate 3% of FUA using the same approach (see Chart 1).

However, in a world where almost all major platforms have made concerted efforts to offer SMAs in the last 5 years (coincidentally discussed by Trialogue this time last year), has such a strong preference for managed accounts translated into a shift by these advisers towards increased platform use?

The short answer is ‘yes’.  SMSF-focused advisers using platforms with established managed accounts functionality were much more likely to be increasing their on-platform FUA – and much less likely to be moving clients off-platform (see Chart 2).  While on the other hand, for those that expected to decrease platform use, 80% were using lead platforms with no managed accounts functionality.  We aren’t suggesting that this is the only factor influencing SMSF-focused advisers’ choice of administering FUA on or off-platform, but certainly the correlation suggests that it is a key consideration.

What this analysis shows is the importance of getting segmentation right when you are looking at research and data about your target market and using it to make decisions.  It’s important to look beyond the ‘averages’ to understand in detail what they want and value.  Now more than ever is this particularly critical in large scale technology builds – given the enormity of costs involved organisations like platform providers quite literally can’t afford to get this wrong.  We covered segmentation in our Trialogue a couple of weeks ago; expending the effort to get good data about your target market to identify drivers of the behaviours and trends of those you’re targeting will pay significant dividends in the long run.

For our part, we have just kicked-off this year’s Tria Australian Adviser Insights Programme – it will be interesting to see what impact particular platform providers’ recent introduction of SMAs and managed accounts capability has had on the platform usage behaviours of their subscribing SMSF-focused advisers – so watch this space!