"A 20 year overnight success": Q&A with Laird Abernathy on CFS' Managed Accounts
Hot on the heels of adviser briefings around Australia, we speak with Colonial First State's Laird Abernathy on the benefits of the firm's Managed Accounts solutions for licensees and advisers, and its growth to what is now a $6 billion business. We also find out a little about Laird - what lead him to a career in finance, why he supports Plan International and how he paid for the phantom comics of his youth.
Hot on the heels of adviser briefings around Australia, we speak with Colonial First State's Laird Abernathy on the benefits of the firm's Managed Accounts solutions for licensees and advisers, and its growth to what is now a $6 billion business. We also find out a little about Laird - what lead him to a career in finance, why he supports Plan International and how he paid for the phantom comics of his youth.
Managed Accounts have been around for 15 - 20 years but only recently have come into the fore, what do you see as the reason for the increase in popularity?
Yes, Managed Accounts have been in Australia for the last 15 years or so. Last month we had our national Adviser Briefings around Australia where we referred to Managed Accounts as a '20 year overnight success'!
Historically we've seen Managed Accounts offered to HNW investors through more niche product providers however advancements in technology now mean that Managed Accounts, in all their varieties, are now being offered by larger platform providers and therefore to a much broader range of industry participants. Coupled with this, todays Managed Accounts bring an alignment of benefits across all segments - clients, advisers and licensees, which is also fuelling their growth.
What are the key benefits of Managed Accounts to Licensees and Advisers?
For Licensees Managed Accounts can improve the efficiency of their business through centralising the management of client portfolios. This can also reduce the risk associated with active trading by advisers in the group, ensuring all advisers within the licensee are adhering to that businesses investment philosophy and model portfolio. In some circumstances, where the licensee is delivering significant investment services in the construct and implementation of the model portfolio, Managed Accounts allow the Licensee to be remunerated for the investment services they are providing.
Managed Accounts can also provide significant efficiency gains for advisers by:
* Outsourcing underlying investment decisions in client portfolios to the professional investment manager.
* Eliminating the need for client authorisation on portfolio changes and therefore doing away with advice documentation associated with these changes (RoA's etc).
The greatest benefit for advisers however is time. The time given back to them through the efficiency gains outlined above mean they can reinvest this precious resource servicing existing clients or sourcing new clients.
And what are the key benefits of Managed Accounts to Clients?
In addition to solving the above business issues for licensees and advisers, Managed Accounts also deliver a number of benefits to clients. They offer clients greater transparency over the investments. They can deliver clients individual tax outcomes as well as allow tailoring on equity portfolios where required. They also give clients access to professional investment managers in their model portfolios and of course clients will benefit immediately from any changes the manager makes to the model portfolio.
All of these benefits help advisers have much more meaningful and engaging discussions with their clients, and allows advisers to tailor their offer to their client base without losing any of the scale benefits of the Managed Account.
What technological improvements has CFS made to its platform administering Managed Accounts that benefit the Adviser and Client?
I think many readers would be surprised to know that that Colonial First State already manages approximately $6.2bn in Managed Accounts. We built our first Managed Account solution for a licensee in 2008 using the proprietary technology on our FirstWrap platform.
We are now offering Managed Account solutions to 19 licensees spanning 482 advisers, so growing from $0 FUM in Managed Accounts in 2008 to $6.2bn of FUM in 2017. It's safe to say that CFS has certainly experienced the broader demand we are seeing for these types of solutions in the market.
Two years ago we made the strategic decision to materially uplift our Managed Accounts capability. Strategic development however doesn't always mean building it ourselves. CFS's approach to strategic development is to use best-of-breed technology on the services we provide to advisers to meet their evolving needs. For our Managed Accounts solution this meant combining the strength of the CFS FirstWrap platform with leading technology provider IRESS. We believe the appointment of IRESS and integration of IPS (their specialised portfolio management technology) will future proof the CFS Managed Account Solution for years to come.
Indeed this partnership will allow us to bring a number of Managed Account solutions to market over the coming year across our FirstWrap and FirstChoice platforms. We think this is an important differentiator for CFS as we believe that advice businesses need a suite of solutions that are fit-for-purpose for their customer base, the one Managed Account solution doesn't necessarily work for every client/adviser and licensee.
In Q3 of 2017 we will be launching Managed Accounts on FirstWrap with a range of Australian direct equity portfolios from DNR, Ralton, Nikko, Commsec and Atrium.
In the same quarter we'll also be launching Tailored Licensee Managed Accounts on FirstWrap. These will allow licensees to efficiently implement tailored investment portfolios that represents their investment philosophy for their business.
And finally in Q4 of 2017 we will be launching Managed Accounts on FirstChoice, this service will bring many of the portfolio administration and efficiency benefits of Managed Accounts to the FC platform for licensees and advisers.
and a little about you Laird...
What was your very first job?
My very first job would have been in year seven where I spent three days a week after school doing a Chemist delivery run. This was a great first job, I got to ride around the streets of Drummoyne, dropping off deliveries for two or so hours and get paid for doing it! All money earnt was spent on Phantom comics.
What lead you to a career in the finance industry?
Mr Day, my high school economics teacher, had a massive influence on me. He had that gift that all good teachers have of making the syllabus relevant and interesting. During my high school years we were going through the 'recession we had to have' so it was great to be in a position to understand what was actually happening in the Australian economy at the time. I ended up studying economics at University and by then I was pretty set on a career in the finance industry.
Is there a particular cause or charity that you support?
I sponsor two children through Plan International. Ala is six and lives in Sudan and Sequelin is eight and lives in the Dominican Republic. It's not by coincidence that I have two daughters the same age and place the onus on them to own the communication responsibilities with Ala and Sequelin. My wife and I have found this approach helps with educating our kids on how privileged we are to live in a country like Australia and not take what we have for granted.
