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Industry Spotlight > Broker Dealers

Sponsors Move to Consolidate Platforms: Cerulli

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In 2018, managed accounts had some $6 trillion in assets, but a Cerulli survey of sponsors of platforms brought to light some good news and bad news for advisors on what to expect in the coming year.

Although growth in assets from 2018 to 2019 was only 1.1%, since 2008 — when the amount in managed accounts was $1.4 trillion — it has been a straight growth trajectory. There were large jumps in assets of 13% between 2016 and 2017, and close to 27%  from 2017 to 2018.

That said, net flows dropped to $475.3 billion in 2018 from a record $604.5 billion in 2017. The Cerulli report notes that “volatility and a decline in capital markets in 4Q 2018 also served to curtail year-over-year growth.”

With fees being key for advisors and investors, managed account platform sponsors said the following about their top priorities:

  • 90% of sponsors stated that “simplifying and streamlining the advisor experience on our managed account platform” was one of their top three priorities.
  • Closely aligned with streamlining platforms was platform consolidation, in which 48% of sponsors stated as one of the top three priorities for 2019. As the report notes, “To many executives at sponsor firms, one of the main goals of platform consolidation is to make an advisor more productive by reducing friction associated with logins to different platforms, multiple investment agreements requiring separate signatures, inconsistent pricing, and disparate middle-office and back-office procedures. “
  • 38% of those surveyed stated that “providing better portfolio construction support” was a top priority “by creating programs to improve the advisors’ ability to be a portfolio manager instead of a stock picker.”
  • Less important were reducing the expense of managed account programs and or platforms (19%) and simplifying fees across managed account platforms (19%).

Of course advisors need to read the fine print. The survey also asked sponsors how quickly consolidation and other changes could take place. Almost 67% said the changes would take more than two years, with 19% stating one to two years and just over 14% stating up to six months.

The process of consolidating platforms is slow — “a glacial shift,” according to one sponsor cited in the report. Merrill Lynch reportedly spent five years and $100 million to create its unified advisory platform Merrill Lynch One, according to the report. Most likely smaller firms will take longer; thus advisors should be patient.

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