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Managed accounts drive profit, revenue surge

Financial advice firms using managed accounts for the last three years have seen almost 80% more profit per owner than those without, new research shows.

Latest insights from Praemium and Business Health show practices using managed accounts achieved significant profit gains despite the pressure the advice industry has been under in recent years.

The research show those using managed accounts for the last three years or more have seen 79% more profit per owner than those not using managed accounts. Previous research by Praemium estimated average profitability per practice was around 28%.

For those firms with 75% or more of their clients in managed accounts, the profits were even greater - estimated to be 127% higher. These same firms had an 84% increase in revenue and 200% increased in revenue per client.

Firms not using managed accounts reported average practice revenues of $1.2 million, while those using them for more than three years reported $2.1 million and those with 75% or more of clients invested reported $2.2 million. Revenues per client for firms not using managed accounts came in at $3224 while those with the bulk of their clients invested were $9685.

According to the research, client relationships are also benefiting with 89% of practices reporting longer and more in-depth meetings, with 67% saying client engagement has improved.

"The quantifiable benefits of using managed accounts are incredibly compelling and those firms fully embracing managed accounts are thriving," Praemium chief distribution officer Martin Morris said.

"What was interesting that the research found was how client-centric and business-minded those firms using managed accounts for most of their client base have become which can only benefit their clients and the future success of the industry as a whole."

Praemium and Business Health estimate 53% of financial advisers are using managed accounts while 40% of them are using them for clients with less than $100,000.

The research is based on responses from 224 advice practices, 76 of which were using managed accounts.

Read more: PraemiumBusiness HealthMartin Morris