Managed accounts consolidation is inevitable, says Cerulli

It’s slow and it will take time, but the managed account platform sector’s shift towards consolidation is sure to come, according to recent findings from Cerulli.

According to Cerulli’s new report on managed accounts in the US, the share of platform sponsors reporting a unified platform architecture has risen from 14 percent in 2020 to 30 percent, while those remaining in a multi-platform environment have decreased from 32 percent to 20 percent.

But survey research by the firm indicates that the consolidation process will be neither quick nor straightforward. Sixty percent of respondents expect the platform consolidation process to take at least two years, highlighting the need for wealth management firms to prioritize platform development efforts and stay competitive.

A critical piece of this consolidation involves integrating various programs, such as mutual fund advisory and rep-as-portfolio manager, into a single, adaptable managed account platform. This unified platform would provide comprehensive access to a wide range of product solutions and variable discretion entitlements, which Cerulli said will be key to enticing advisors.

By enhancing an existing platform rather than introducing a new one, Cerulli said sponsors can ease the transition for advisors, lowering their resistance by allowing them to adapt to new features on a familiar system.

In designing a consolidated managed account program, platform sponsors must weigh numerous factors to balance project costs with the benefits. Respondents frequently identified three factors, which Cerulli said set the baseline expectation for a consolidated platform, as "very important":

• A single advisor login for all managed account portfolios (80 percent)
• Streamlined middle-office workflows (73 percent)
• A universal client investment contract (67 percent)

According to Scott Smith, director at Cerulli, how advisors use technology to use clients is one of the most critical elements in the wealth management ecosystem.

“Advisors must be able to leverage the solutions at their disposal to help meet the preferences and goals of their clients,” he said in a statement. “In today's wealth management environment, every part of that process is dependent upon advisors making the most of the technology platforms available to them.”

No one needs to tell today’s advisors about the benefits of tech platforms. Still, Smith argues the vast majority, if not all, aren’t using their digital resources to the fullest for a variety of reasons.

 “Lack of time, training, comfort, reliability, and perceived need all contribute to advisors’ reluctance to fully adopt the systems available to them,” Smith said.

For managed account providers looking to win the minds and wallets of advisors, the key lies in showing, not just telling, how they're better than the competition.

“To help advisors overcome these points of resistance, providers must be able to prove that their platform will offer solutions that are a combination of easier, better, faster, and cheaper than those they are currently using,” he said.