Are Managed Accounts Just for the Ultra-Wealthy?

BOSTON - Managed accounts used to be for the wealthy, but in the last 18 to 24 months, they have become increasingly available to the mass affluent because of a reduction in costs and an increase in efficiency, said AJ Harper, managing director of Lockwood Advisors, an affiliate of Pershing, a BNY Mellon company, in an interview at the Money Management Institute annual conference here.

“Now we can deliver a solution to someone with $10,000 in assets, whereas before clients would need $50 million with a blue-chip bank,” Harper said.

The managed account industry is a $2.2 trillion industry, according to Cerulli. At Pershing, which has $225 billion in assets, Harper said 50%-60% of new clients are managed account clients.

The key to managed accounts, said Harper, is it requires an ongoing conversation between an adviser and a client. “Managed accounts force advisers to sit down and spend time with clients each year and do a risk tolerance questionnaire,” he explained. “With a managed account, an adviser is not just selling a product one time. They are creating an ongoing relationship with a fiduciary obligation.”

Now with the regulatory push and the scale of the industry, there is a significant economic incentive for firms to move into managed accounts and to cut costs. “Managed accounts are no longer for the high-net worth-investor. They are for the emerging investor. And today’s emerging investor is tomorrow’s high-net-worth investor.”

 

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