There is a common assumption in financial advice practices that managing client portfolios in-house - selecting the underlying investments, rebalancing positions, handling corporate actions, and producing performance reports - is the most cost-effective approach. Outsourcing through a managed account platform, by contrast, can appear to be an additional expense layered on top of existing platform and product costs.
This assumption deserves scrutiny. Once the economics are properly understood - including who actually pays the managed account fee, and what institutional scale can do to underlying fund costs - the case for outsourcing through a professional investment manager often looks even more compelling than it first appears.
The Visible Costs and the Invisible Ones
When practices evaluate the cost of managing portfolios in-house versus using a managed account structure, they typically focus on visible line items: platform administration fees, managed account management fees, underlying fund manager fees, and any adviser fees. These are measurable and comparable.
What is rarely measured is the time cost - the hours advisers and paraplanners spend on investment-related activities that a managed account structure would otherwise handle. This is the invisible cost, and in most practices it is the largest one.
Consider the activities that fall to the advice team when portfolios are managed directly:
- Monitoring individual security and fund positions across all client accounts
- Deciding when to rebalance and producing client-specific recommendations or SOAs to authorise those changes
- Handling distributions, corporate actions, and maturity reinvestments
- Preparing for and conducting investment-focused client review meetings
- Producing portfolio performance reports, often by manually consolidating data from multiple sources
- Staying current with underlying fund manager research and due diligence
Each of these activities has a real hourly cost. In most Australian advice practices, adviser time is valued at somewhere between $300 and $600 per hour when you account for the revenue those hours could alternatively generate. Paraplanner time typically ranges from $80 to $150 per hour.
Who Actually Pays the Managed Account Fee?
Before running the numbers, it is worth correcting a misconception that frequently distorts this analysis: the managed account management fee is not a cost borne by the advice practice. It is paid by the end client, disclosed in the product disclosure statement and fee schedule, and deducted from the client's account - not from practice revenue.
This distinction matters enormously. When a practice moves clients onto a managed account structure, it is not writing a cheque to the investment manager. The practice’s own P&L is not debited. What the practice gains - recovered adviser and paraplanner time - flows directly to its bottom line, while the fee sits entirely on the client side of the ledger.
This reframes the economics completely. The practice does not need to justify a fee expenditure out of its own revenue. Instead, the question becomes: does the managed account structure deliver sufficient value to the client to justify the fee? The answer depends heavily on what the client gives up or gains in terms of underlying investment costs.
The Scale Dividend: How Institutional Access Changes the Fee Equation for Clients
This is where the economics become particularly interesting. When a professional investment manager such as Bellmont runs a managed account, they are not purchasing underlying funds at retail rates. They are accessing institutional or wholesale share classes - or negotiating volume-based fee arrangements - across the total FUM they manage on behalf of all clients and practices.
As a result, the management expense ratios (MERs) that clients pay on underlying funds within a professionally managed account are often materially lower than the rates available to an advice practice or retail investor accessing those same funds directly.
In many cases, the fee discount on underlying funds is sufficient to substantially offset - or even fully offset - the managed account management fee. For example, a fund that costs 65 basis points at retail might be accessed at 40 basis points within a managed account. If the managed account fee is 20 basis points, the net additional cost to the client is close to zero - or even slightly negative, meaning total investment costs are lower.
This is not theoretical. It reflects the practical impact of aggregating FUM and applying that scale to fund-level pricing.
Running the Numbers - Correctly
To illustrate, consider a practice with 150 clients and an average portfolio size of $1 million - a $150 million book in aggregate.
Under the original framing, a 20 basis point managed account fee appears to cost $300,000 per year, which seems expensive relative to $105,000 in recovered adviser time.
Under the correct framing, that comparison dissolves:
- The $300,000 is not a practice cost. It is paid by clients.
- The practice’s gain - recovered adviser time - comes at no additional cost.
- The net cost to clients may be close to zero once institutional pricing is factored in.
The adviser time savings remain entirely real. At an adviser rate of $350 per hour, recovering two hours per client per year across 150 clients frees up 300 hours - or $105,000 in annual capacity. That capacity is a pure gain and can be redeployed to growth, deeper client engagement, or reduced staffing pressure.
The relevant comparison is therefore not $300,000 in fees versus $105,000 in savings. It is $105,000 in time savings - plus improved client outcomes and compliance efficiency - against no meaningful additional cost to the practice.
The Compliance Cost of In-House Management
One cost that is frequently underestimated is compliance overhead, particularly in a post-Hayne regulatory environment.
When a practice manages portfolios in-house, changes typically require a Record of Advice (ROA) or Statement of Advice (SOA). Producing these documents across a client base is a substantial paraplanning and administrative burden.
Under a managed account structure, changes to the model portfolio do not trigger individual advice documents. The client has already consented to the mandate, allowing changes to be implemented across all accounts without individual documentation.
For practices making regular portfolio adjustments, this reduction in compliance workload is a meaningful operational benefit.
What In-House Management Does Well
This is not an argument that managed accounts are right for every practice.
Practices with strong internal investment capability - including dedicated committees, research resources, and experienced advisers - may deliver outcomes that justify the internal cost. If investment capability is a genuine differentiator, that has real value.
Similarly, certain clients - particularly those with complex structures, direct equities, or tax sensitivities - may not suit a standardised managed account approach.
Conducting Your Own Analysis
To assess this for your own practice, consider:
- How much time your team spends on investment-related activities
- The fully loaded cost of that time
- The difference between retail and institutional fund pricing
- The net cost to clients after fee offsets
Most practices are surprised by how favourable the economics look once these factors are properly accounted for.
Making the Decision
The decision between in-house portfolio management and a managed account structure is ultimately strategic. It reflects where your competitive advantage lies, how your team should allocate time, and what your clients value most.
What matters is making that decision with a clear understanding of the true economics - who pays each cost, what scale can deliver, and what recovered adviser time is actually worth.