What managed account firms are doing differently that drives success.

Against the challenging backdrop of increasing compliance, regulatory pressure and the rising costs to deliver an advice service, profit margins for advice businesses continue to be squeezed and adviser numbers have diminished.

Praemium’s latest research, conducted with leading financial services consultants Business Health, assessed 224 advice practices, of which 76 were regularly using managed accounts. The research identified that firms using managed accounts enjoyed a significant profitability and revenue uplift relative to peers who were yet to use the solution.

Firms using managed accounts for more than three years achieve 79% more profit per owner* than firms not using managed accounts. This figure rose even more for firms with 75% or more of their client base invested in managed accounts, who turned a notional profit per owner 127% higher than non-users*.

The incremental benefits of embracing managed accounts as a whole of business solution were also seen in revenue figures. Those firms using managed accounts for 75% of their client base had an 84% uplift in practice revenue and 200% uplift in revenue per client.

And the benefits don’t just sit with advisers. Investors are benefiting from more time with their advisers in client-facing engagements, with longer client meetings (89% of firms spend 60 minutes+ in client reviews) and more in-depth reviews. This has seen 67% of firms using managed accounts for the majority of their client base cite a significant improvement in client engagement.

The research also showed that those firms that embrace managed accounts are doing more of the things that drive profitability.

Prioritising the client experience

Advisers using managed accounts, and particularly those embracing it as a whole of business solution, are spending longer with their clients at review time and having more in-depth conversations. They are also significantly more likely to ask clients for feedback to ensure client satisfaction.

Leveraging managed accounts for scalability

Firms using managed accounts recognise the efficiency benefits they deliver will help them to achieve the scale needed to deliver the outcomes they want for their clients and their staff. The research figures confirm that the solution has been proven to deliver scale benefits to many of those firms implementing a growth strategy.

Working on their business, not just in it.

Unburdened from back-office admin, managed account firms are directing time into strategic planning activities, documenting their goals and value proposition. They are also seeking feedback from external businesses to continuously improve and drive their business forward.

Taking a strategic approach to selecting a technology partner

With a defined value proposition and a clear idea of their clients’ needs, managed account firms recognise that platform selection is not just based on cost. A good long-term technology partnership is one where the values of both businesses are aligned. The platform should have the functionality required to allow an advice practice to scale and grow into the future and support the range of strategies, advice models and service agreements that the firm may have in place.

?Managed accounts continue to deliver success for the advice firms that use them and even more so for the ones that embed the solution into their business model. What’s more, those firms are displaying a mindset that is also driving the success of their business, setting themselves up for a sustainable, growing and profitable future.

?Download the research at www.praemium.com/profit-facts

Praemium Australia Limited (ABN 92 117 611 784 (Praemium) has prepared this document for general information purposes for financial advisers and professional investors only.

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