Key reasons to consider a Separately Managed Account (SMA) for your clients’ superannuation

Australia boasts the fourth largest pool of retirement savings globally, with a staggering $3.85 trillion in funds under management as of March 2024​ (APRA)​, more than the market value of all the companies listed on the Australian Securities Exchange. Industry super funds and platforms that offer superannuation have been a popular choice for direct investors and advisers. However, the landscape is evolving to include Separately Managed Accounts (SMAs) which are now being offered on platforms with lower cost administration fees.

Advisers requiring low cost superannuation solutions for clients historically had to utilise multimanager funds, which often came at higher fee scales and may have lacked transparency. Advisers often had to pay for platform administration features that weren’t required for some investors. Alternatively, their clients were invested in a default fund, which may have their own drawbacks.

The use of SMAs can lead to significant cost savings given greater automation, lower transaction costs, beneficial ownership and greater transparency, all of which can benefit superannuation investors.

Most notably, clients have beneficial ownership of the assets in which they invest, which can include ownership of exchange traded funds (ETFs). This gives investors greater visibility over their portfolio, including composition and weightings. Transparency is particularly important for retiree savers who are self-directed and like to know where their money is going and how their portfolio is performing. If an SMA holds ETFs, then those ETFs provide additional visibility of their stock or bond holdings. This ‘drill down’ level of transparency allows superannuation investors to see exactly which assets they own at any given time. This does not exist with multi-manager funds or default superannuation options, where transparency is more limited.

Frequency of valuations is another key benefit of using SMAs. The assets in an SMA portfolio, including those holding ETFs, are valued at the end of each trading day. This frequency provides a more accurate and timely reflection of a portfolio’s value. Generally, most unlisted managed funds have daily liquidity features. However, ETFs offer an additional layer of liquidity through the appointment of liquidity providers, known as market makers.

Investor profile matching and labelling is another key benefit for advisers and investors using SMAs. Betashares’ SMA portfolios, for example, are based on the Australian Prudential Regulation Authority’s (APRA) Standard Risk Measure (SRM), ensuring that the asset allocation matches those defined risk profiles. For instance, a ‘balanced’ risk profile in a Betashares SMA is determined to be a 50% growth and 50% defensive split of asset classes. This allows an adviser to better match a client’s investor profile with an SMA portfolio.

This is a different approach to investor profile labelling from that adopted by superannuation funds and their default fund portfolios. Some of these investment vehicles have a ‘balanced’ investor option holding up to 80% in growth assets. As a result, an adviser utilising a Betashares SMA via a platform will find it easier matching an investor’s risk profile with portfolio labelling.

Betashares supports advisers using its SMAs through its Business Acceleration Services, offering practice development (including business planning and client value proposition formulation), marketing support, portfolio analytics and construction services. Advisers using Betashares SMAs also benefit from access to the Betashares Investment Committee, Portfolio Management Team and Chief Economist. This multi-level support approach transforms the selection of Betashares SMA portfolios into a business partnership with advice firms. This support can significantly enhance an adviser’s practice, offering tools and resources to grow and manage the advice business more effectively. This also enhances the advice proposition for superannuation investors.

In addition, Betashares SMAs deliver several points of value and product differentiation for those saving for retirement. These include Dynamic Asset Allocation (DAA) and the use of smart beta and factor exposures, all delivered at a low cost.

The availability now of these lower cost admin platforms provides certain clients the key functionality and benefits of a platform, but at a lower cost. Importantly the underlying option for the super balance to by invested in an SMA that holds ETFs carries with it many benefits for both the client and their adviser.

Available across a broad range of platforms in Australia, Betashares Managed Accounts are an attractive choice for advisers looking for a more scalable, transparent and efficient advice practice solution coupled with numerous benefits for their clients.

Please get in touch today to discuss how Betashares Managed Account solutions can work for your clients and your advice practice.