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Editorial : What managed account means to your clients |
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 The term “managed account” is thrown around quite recklessly in the financial services industry. It can mean different things depending upon the type of organization you are talking with. Today there are multiple conferences about managed accounts and speakers are forced to specifically define exactly what they are talking about at the beginning of their presentation.
What is most amazing and probably most important is that investors have no idea what the term “managed account” means. They know that their broker manages some money for them in an account. That account may hold bonds, securities and mutual funds. They just know that the broker or other advisor takes care of it for them. Generally they know and expect that this account is invested in multiple different securities. This means that another term commonly used in the industry, “open architecture”, also has little relevance or meaning to them.They might also understand that their investment advisor has an account in which several managers of various types invest the funds. It’s unlikely that they truly understand but they do know that they get updates from their advisor on a regular basis regarding the performance of certain managers. For the most part, they trust their advisor to take care of this for them.Despite the fact that investors do not truly understand the different versions of managed accounts, it is critically important for providers to offer these services….whatever they may call the actual account/investment or product. When we ask affluent investors where most of their assets are invested, generally about 30% are invested in a “managed account”. We take great lengths to define what a managed account includes. For the most part it is described as a pool of assets managed by someone else (a broker, investment manager, etc.)Investors don’t expect these accounts to be limited by the technology or trading platform the account may be on. Nor do they understand that only certain types of investments can be included….maybe because their advisor doesn’t have a relationship or agreement with a specific investment provider. They most certainly don’t understand that their account may not be large enough to hold securities….only mutual funds.This is what advisors and financial providers must understand as they try to effectively meet investors’ needs.Catherine S. McBreen
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High Net Worth Advisor Insights Newsletter April 2008
