Four roadblocks to onboarding managed account clients … and ways to get around them

We’re told the more emphasis you place on planning, the easier it will be to transition clients to managed accounts. This starts with developing a clear picture of your client base.

During this phase of the process, it’s good practice to document:

• Clients’ assets
• Their existing investment approach.
• Tax implications for switching from their current investment style into managed accounts.
• Current and future return expectations and income requirements.
• Liquidity and cash flow profile.
• Risk appetite and how it may change over time.
• Annual fees.
• Ethical and ESG preferences.

Once you have established a detailed picture of your client base, you can segment them. This is important, because it’s likely you will need to re-segment clients into different groupings to get the most from your new managed account value proposition.

A golden rule of successful change management is to articulate each step of the process. At the start of the switch to managed accounts, advisers with experience doing this have said it’s prudent to compare clients’ current and future situation in both scenarios.

Then, they suggest mapping out portfolio returns under different market conditions, as well as the new model investment portfolios’ risk profiles in a managed account environment. These businesses have also found it valuable to stress test the portfolio under different scenarios.

Top advisers have told us ‘early and often’ should be the approach when it comes to communicating to clients about the change to managed accounts.

They say it’s important to let customers know what’s happening as soon as the managed account building blocks are in place, by clearly setting out the value proposition to them. This will give them a chance to air any objections so you can address them head on and tell them all about managed accounts’ many benefits.

For instance, there’s an opportunity to help clients to understand it’s much easier and quicker for advice practices to respond to major market movements with managed accounts, as opposed to managed funds. It also means you will be able to spend more time understanding their needs and making sure their investments can meet their requirements now and in the future. Of course, it’s wise to let them know there are still options to directly invest in shares and other assets through managed accounts.

As our advisers have found, during the transition process, it’s easy for the practice to experience inertia, especially if you’re deep in the trenches of the change. This can play out in ‘client hoarding’. This is when advisers keep clients to themselves and don’t complete the process of transitioning them to managed accounts.

It can also be tempting to stall the process if markets are volatile, as they are now. But markets will always go up and down and there’s no perfect time to switch to managed accounts. Ideally, the process should be market agnostic.

Moving to managed accounts requires time and focus, but with sufficient planning it is possible to effect an orderly switch. An option is to test the onboarding process with a small group of clients as a pilot before moving the bigger cohort across to managed accounts.

Practices that have done this have found this has given them the opportunity to iron out issues before making the bigger switch. It’s also a great way to favourably predispose your clients to managed accounts so they can see their advantages right from the start.

As we are often told, what’s key is to take your time, consider feedback and keep communicating throughout the process. That way, the end result is more than likely to deliver benefits to all.