Financial Planning
Managed accounts add brilliant value for dealer group

Managed accounts are enabling an independent advice group to be more disciplined in its investment approach, and adding more value to the client relationship, according to its co-founder.

GPS Wealth principal adviser and co-founder, Rob McGregor, who will present at tomorrow's Best Practice Forum on Managed Accounts, said managed accounts have enabled his practice to seamlessly execute the firm's investment philosophy.

Prior to using managed accounts, GPS Wealth had a well-established investment methodology and process called CARE, which is based on a core satellite philosophy.

McGregor was running the CARE methodology as a model portfolio on an adviser or platform level, which also had a mixture of direct investments and ETFs.

CARE was an ideal way of explaining complex topics to clients and assesses how they were tracking to retirement goals for example, he said.

The 'C' stands for 'core portfolios' with a long-term strategic asset allocation making up the bulk of the client portfolio; the active or tactical component sits between 10% to 30%.

The 'Reserves' portion is perhaps the most important for retirees as cash and short duration fixed income investments provide about four years of liquidity, he said.

"If a client has $1 million and is taking $50,000 per year out, we want to see a $200,000 in low risk investments so that they know with certainty they have pension payments coming without having to sell any of the growth assets."

By the time they receive dividends, that provides six to 10 years of liquidity, because one core investment belief is ensuring clients not having to sell growth investments at a bad time, he added.

The 'Enhanced' portion aims to gain slightly higher returns and transparency, usually through a direct portfolio across Australian and international shares. This commonly used with sophisticated clients with an SMSF or have more than $500,000 to invest.

The group runs a portfolio construction tool that allows advisers to build individual portfolios for clients based on their goals, risk profile and liquidity requirements using five core portfolios: high growth, growth, balanced, moderate, and conservative.

But it wasn't until colleagues in the industry introduced McGregor to managed accounts that the "lights went on," and being able to run consistent portfolios for clients in a scalable, more efficient way was nothing short of "brilliant."

In the past, McGregor "couldn't do the little things that add value over time."

It was much harder to do disciplined rebalancing, and implement asset allocation or portfolio changes across the board changes, he said, adding some clients' investments tend to get changed at review time while some get neglected - which is no longer the case with a managed accounts solution.

Read more: CAREGPS WealthBest Practice Forum Managed AccountsRob McGregor
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