NEXT CHAPTER

Steve Gresham

Advisors were also once reluctant to adopt managed accounts , too . But they got over it .

HY WOULD I GIVE MY CLIENTS ’ MONEY to another advisor ? What would be my value ?”

That was the common response in the early years when financial advisors were asked about managed accounts . Today , that product is a workhorse for our business . Financial advisors have amassed more than $ 11 trillion of client assets in this product , an idea once so abhorrent that when I suggested using them I was told I could lose my job because branch office managers were convinced the product would mean the collapse of their revenue .

Now let ’ s take another product that gets so little respect you could call it the Rodney Dangerfield of financial advice : the annuity . You can tell it gets no respect when you look at its share of retirement assets . That ’ s eerily similar to the treatment once given the first managed accounts . Annuity skeptics continue to abound even as the product evolves . The new reality of these vehicles is that they are designed to protect client assets more efficiently than a regular portfolio of investments . Consider the following arguments and ask yourself if they sound familiar : “ Managed accounts are too expensive .” The first managed accounts sported annual fees of 3 % per year , which seemed high to portfolio managers offering their institutional clients the same service for much less . Three percent didn ’ t sound so high to stockbrokers when you compared it to the commissions

The new reality of these vehicles is that they are designed to protect client assets more efficiently than a regular portfolio of investments . on their stock trades or to the 8.5 % frontend loads on some mutual funds , the 4 % load on a bond or something similar for a unit trust .

The reality is that competition brings down costs — to the benefit of the consumer — and managed accounts now average closer to 1 % per year . The 8.5 % sales loads are gone , and the commissions are zero at Fidelity . Likewise , annuities are not all priced the same way , and advisors who remember the once heavier costs on variable annuities are usually surprised by the current figures .

“ Selling managed accounts will cut my income .” Advisors who were used to commissions thought that turning assets over to a managed account would mean their income would be slashed . They are wary of annuities for the same reason : They think purchasing annuities on most platforms means reducing the amount in assets they manage directly .

When it came to managed accounts , more forward-thinking advisors saw the potential for building assets , leveraging the markets for growth of AUM and giving themselves more time to work with clients and to find new business . They traded the short-term hit to their current income for a chance to build for the long term .

For similar reasons they can benefit by adding protected income strategies . These recommendations are often viewed by clients as an additional service — which means it ’ s something that can help

JANUARY / FEBRUARY 2024 | FINANCIAL ADVISOR MAGAZINE | 27