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ESG managed accounts on the rise

Financial advisers are turning to managed accounts when looking to implement responsible investment solutions for their clients, new research shows.

The latest SPDR ETFs/Investment Trends Managed Accounts Report showed 72% of advisers prefer to use managed accounts for ESG while 60% are already using managed accounts to implement it.

The use of managed accounts for ESG exposure is higher among younger advisers, with 41% of those under 40 years old compared to 22% of advisers over 55 years old.

Further to this, over one fifth of advisers using managed accounts for ESG investments are selecting multi-assets with high ESG ratings.

State Street ETF Model Portfolio strategist Sinead Schaffer said the events of 2020 were a catalyst for the increase in flows to ESG investments.

"Going forward in the future, we will likely see large allocations towards ESG managed accounts and also growth in the type of managed accounts that are ESG in the market," Schaffer said.

The report also found that 70% of advisers are either using managed accounts or intend to, up from 44% in 2012.

As such, new client inflows into managed accounts have grown 42% over the last 12 months.

"The benefits of managed accounts are being seen by advisers and how they are able to the client and provide better outcomes," Investment Trends chief executive Sarah Brennan said.

From the advisers that did use managed account throughout COVID-19, 88% said it both freed up their time and sped up the execution of transactions while 83% said it strengthened their value proposition.

"By using managed accounts, it actually massively supported advisers through market volatility and periods of uncertainty. We also found those who are using them for longer on average, realise more benefits in the COVID-19 pandemic," Schaffer said.

Over 80% of advisers that use managed accounts believe it is easier to demonstrate client best interest duty through managed accounts compared to managed funds (73%) and a portfolio of direct shares or listed investments (69%).

Read more: ESGInvestment TrendsSinead SchafferSarah BrennanSPDR ETFs/Investment Trends Managed AccountsState Street Global Advisors