FEATURE | Managed accounts | Industrialising advice

Consider a situation where a financial adviser believes an investment is no longer suitable for their clients.

Perhaps a fund manager is underperforming or a stock held directly by clients needs to be sold.

In the past, advisers would often have to wait until their next meeting with the client to sign off on changes, Townsend Cobain adviser and founding partner Tim Townsend says.

"The issue became that very often you might make a decision to make a change to the client portfolios, but you might not be meeting with that client for another six months," he says.

"And so, the actual implementation of what was potentially good advice would have to wait until the next meeting or review with the client."

If the change was urgent, the adviser might start ringing clients to seek permission. Townsend wonders how many clients an adviser could actually get through in a day. Maybe 10? Maximum 20?

"Now, if you're looking after 100 clients, what's just happened to the other 80?" Townsend asks.

"As an adviser - someone who cares deeply for the interests of your client and wants the best for your clients - you get to go home that night, put your head on the pillow, knowing you have just left 80% of your clients out in no man's land."

Managed accounts technology solves exactly that.

A managed account is a structure that sits on platforms such as HUB24 or Netwealth, where model portfolios are available. An adviser can pick ready-made portfolios or choose to work with an investment manager to customise the portfolios according to their clients' needs.

The investment manager makes strategic decisions on changes to the portfolio, then instructs the platform to execute that rebalance across all client portfolios at the same time.

The adviser no longer needs to call every client and one decision now reaches every portfolio at once.

Townsend says clients sign off upfront on the adviser's ability to make and implement decisions as needed.

"What we do is we ensure the client is told as soon as that change is being made, they're told about it straight away," he says.

Along with allowing clients to receive the best advice without delay, Townsend adds the technology has helped treat all clients equally.

"Whether or not we were managing multi-million dollars of assets in our client portfolio, or somebody that had a smaller balance, they received equal investment service as a result of the managed account structures," he says.

The Institute of Managed Account Professionals (IMAP) data shows funds under management in managed accounts grew by $60.2 billion over the past year to reach close to $300 billion at the end of December 2025.

Adviser adoption is also becoming mainstream, with the latest Investment Trends research showing 61% of advisers in Australia are already using managed accounts, and another 13% considering doing so.

Managed accounts are essentially wrappers under which a client's money can be invested either through managed funds, where the client owns a unit in a pooled fund, or through direct securities owned by the client themselves.

For example, Townsend Cobain has 65% of its clients' investments in managed funds and 35% held in direct ownership, both sitting under the managed accounts wrapper.

Speaking at a recent industry event, Generation Development Group (GDG) chief executive Grant Hackett also points to the tax advantage for direct assets sitting under managed accounts.

"If you're buying into a unitised structure, you're normally buying into an embedded tax liability," Hackett says.

Where a managed account holds direct securities, the investor receives their own cost base from the day they invest and avoids inheriting embedded capital gains from other investors - a level of tax control not possible in a pooled managed fund.

GDG's own dealmaking illustrates how quickly the sector is consolidating. The group acquired Lonsec Group and later Evidentia in the last two years, bringing the two established managed account businesses under the Evidentia Group banner.

With $40.5 billion in funds under management, Evidentia Group is one of Australia's leading managed account providers.

Evidentia operates three distinct brands. Lonsec Investment Solutions provides ready-made, off-the-shelf portfolios that advisers can select from platform menus. Evidentia Private builds personalised portfolios tailored to an advice practice's client base. Implemented Portfolios goes further again, offering individualisation down to the level of a specific client.

Evidentia Group chief executive Michael Wright says managed accounts have moved from being a niche implementation tool to the default operating model for modern advice businesses.

The market is now maturing, he notes, beyond off-the-shelf ready-made portfolios towards customisation.

"What's happening is increasingly advisers want tailored solutions aligned to their own investment philosophy, client segmentation and advice process," Wright says.

At Zenith Investment Partners, customised portfolios now account for 90% of the almost $7 billion it manages through managed accounts, head of portfolio solutions Andrew Yap says. The remaining 10% sits in traditional off-the-shelf public menus.

Yap notes advice and dealer groups increasingly look to build portfolios that are fit for purpose for their practices and match client priorities - whether that means responsible investment, sustainable or low-cost options.

He adds the biggest reason driving customisation is clients' desire to have greater control over how assets are directed.

"You might go into an industry super fund, but what if you have a true belief in value-oriented investments, or you want sustainable investments or growth-oriented? You might be marginalised in terms of your investable menu or your choice there, so you can't reflect those views," Yap says.

"As people start to accumulate broader wealth, many start to say, 'Well, maybe I want to go to a self-managed super fund (SMSF), or I want to go to an advice practice that can really tailor a plan which is purpose-built for my personal situation and circumstances'."

Hackett adds tailored portfolios have now become more democratised, with the scale needed to justify an advice practice running its own managed account falling sharply.

"It was probably north of $300 million to $400 million initially that you really needed to make sense to have your own managed account and really roll that out for your client base. But now that could be as low as $50 million to $100 million, or even less in some circumstances," he says.

Since GDG acquired Evidentia, Hackett says, the business has added another 22 clients in just over 12 months.

As the industry moves further towards tailored portfolios, Wright adds that clients, platforms, responsible entities, and regulators all expect investment managers to have institutional-grade operating capability and technology to support the scale.

"Five, 10 years ago, the technology requirement was more on the platforms, being able to execute managed accounts," Wright says.

"But it's changed significantly and there is a big reason... You simply cannot deliver tailored managed accounts at scale without sophisticated technology as an investment manager.

"What the technology allows you to do is automated portfolio rebalancing. It allows you to do efficient trade instructions to the platforms. It allows you to do risk monitoring, governance oversight, tax management and reporting."

The demand for institutional-grade capability has drawn a new type of player into the market: firms that have traditionally served institutional clients are now moving into the wealth market.

Asset consultant JANA Investment Advisers recently created the role of general manager of wealth, appointing Zac Leman, who previously ran managed accounts at BT Financial Group.

JANA says the appointment reflects growth in the wealth business, with total wealth client funds under management reaching $15 billion, including more than $3.4 billion in managed accounts.

"If you think about what JANA's business has been traditionally, it's very much institutional consulting. About five years ago, JANA put a strategy forward to see what we do in the institutional world could translate into wealth," Leman says.

Leman notes JANA works with mid- to top-tier advice licensees, consulting on their investment committees and building portfolios that they can take out to their clients. He adds JANA can also help advisers leverage its institutional presence when engaging fund managers to help drive better fee outcomes.

"We can work with them to build something bespoke, bottom up from scratch, an investment strategy or an investment program for their business," he says.

"Or if they've already got an investment program, then we can look at that. We can evolve and strengthen the governance and structural oversight."

The rapid growth and industrialisation of advice through managed accounts is also drawing the corporate regulator's attention to the governance of what is being offered to retail clients.

Managed accounts operate under two legal structures: separately managed accounts (SMAs) and managed discretionary accounts (MDAs).

SMAs are the structure most widely used for retail clients, with IMAP data showing that around 64% of managed account funds under management sit within them.

An SMA is a registered managed investment scheme requiring a responsible entity, which is the legal owner and product issuer, while the client remains the beneficial owner.

MDAs are unregistered schemes and offer greater flexibility, typically for high-net-worth clients.

Late last year, ASIC sent out notices to advice licensees and SMA providers seeking information on governance frameworks and the management of conflicts of interest.

The regulator wants to understand how the relationship between advice licensees and SMA providers works, with specific requests for contracts and correspondence between the two.

At issue is whether advisers and licensee groups face any incentive - such as sales targets, inducements or revenue - to recommend particular SMAs, especially where the product is run by the licensee's own related entity.

This article is featured in Financial Standard's fortnightly newspaper  Volume 24 Edition 16. To keep reading click here. To subscribe, sign up here.