In Practice November 25, 2007

Advisers Planning to Increase Use of Managed Accounts

Although all advisers plan to increase their use of managed accounts, registered representatives at broker-dealer firms are twice as likely to plan on doing so.

Reported by

Alison Cooke

The majority (52%) of registered representatives at broker-dealer firms plan to increase their use of managed accounts in the future. However, registered investment advisers (RIAs), do not plan to be jumping on the managed account bandwagon at the same rate. Only about one-quarter (27%) are expecting to increase their usage of managed accounts, according to recent data provided by Cerulli Associates.

Managed account programs offer advisers at broker-dealers the ability to operate much like RIAs, by offering open-architecture investment management and fee-based pricing, Cerulli notes in its latest Cerulli Edge Advisor Edition report. Half of all advisers say that managed accounts generally create stronger client relationships and are more profitable.

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“The asset allocation component of these programs allows advisers to sell an investment process rather than depending on the sexiness of recent performance to generate a commission,” the report notes. Advisers also like managed accounts because they believe the fee structure aligns their interests with their clients by seeking to grow their assets rather than complete a transaction.

Contrarily, RIAs seem less eager to use managed accounts because they may feel that such programs violate their independence, and often are reluctant to adopt the research assistance provided by many managed account programs, the report suggests. However, RIA firms can often benefit from managed accounts as technology platforms that offer high-end reporting and tax optimization tools.