Last updated: 12:20 / Thursday, 14 August 2014
Cerulli's Report

Discretionary Programs Growing 50% Faster Than Nondiscretionary

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Discretionary Programs Growing 50% Faster Than Nondiscretionary
  • As of year-end 2013, total managed account assets reached nearly $3.5 trillion
  • Cerulli anticipates continued growth in the managed accounts space as more advisors adopt the programs
  • Cerulli projects the managed account market will exceed $5 trillion in assets under management by the end of 2016

According to global analytics firm Cerulli Associates, discretionary managed account programs are growing 50% faster than nondiscretionary programs.

"Discretionary advisory platform growth has far outpaced nondiscretionary programs and separate accounts over the last two years," states Frederick Pickering, analyst at Cerulli. "Nondiscretionary unified managed account programs have grown faster than discretionary programs overall, but their small asset base had little effect on overall weighted growth rates."

As of year-end 2013, total managed account assets reached nearly $3.5 trillion, representing more than 25% growth over year-end 2012. Cerulli projects the managed account market will exceed $5 trillion in assets under management by the end of 2016.

Strong market returns paired with substantial inflows pushed each program type, except separate accounts, to record asset levels. Though differences exist between sponsors and advisors regarding how to best implement the programs, the recurring revenues and process-driven portfolio management aspects of fee-based relationships have been roundly embraced as the industry’s preferred option for the delivery of wealth management services.

Overall, Cerulli anticipates continued growth of the segment as more advisors adopt the programs, and advisors who already use the platforms transition more clients out of commission relationships.

In their Managed Accounts 2014: Confronting Threats report, Cerulli analyzes the fee-based managed account marketplace, which has been a core research focus since the firm's inception in the early 1990s. This report, in its twelfth iteration, is the result of ongoing research and quarterly surveys of asset managers, broker/dealers, and third-party vendors, which captures more than 95% of industry assets.
 
"Advisors have largely accepted that discretionary account management simplifies their business model and allows for greater trading efficiency," Pickering explains. "Having already chosen to place their faith in their advisors by initiating their relationships, few investors feel the need to be consulted before any possible trades are executed."

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