The total volume of assets in managed accounts grew only slightly in the second quarter, limited by poor returns in the stock market. Yet, brokers say that managed accounts are a tough sale, despite the obvious benefits that a consultative-based approach can offer clients. That should come as no surprise, since few like to discuss investments during the depths of a bear market (of course, that is precisely when one should).
Total assets rose to $417.14 billion at the end of the second quarter, according to the Money Management Institute, an industry trade group. That’s up only slightly from $413.29 billion at the end of the first quarter. At the end of last year, managed accounts held just about $400 billion in assets. By contrast, assets in mutual funds still dwarf managed accounts assets, but the fund assets dropped to $6.632 trillion in the second quarter, which is down from $6.975 trillion at the end of 2001, according to the Investment Company Institute, a mutual fund industry trade group.
The predictions for managed accounts is huge, with the Financial Research Corp. estimating that assets held in separately managed accounts would hit $1 trillion by 2005 and total nearly $3 trillion by the year 2011.
Officials at the Washington-based Money Management Institute remain optimistic about the possibilities for these types of accounts, which allow for more individualized attention to a client, rather than the one-size-fits-all approach inherent in mutual funds. "The markets have been in flux all year, making the industry’s moderate growth path since the beginning of the year all the more noteworthy," said Chris Davis, executive director of MMI, in a statement.
But brokers are less sanguine. With the current state of the market, some reps expect that the growth of managed accounts will continue to be modest as long as clients are worried about paying a fee for something that is currently losing them money. "Nobody wants to hear it right now, because people are just scared," says one broker at Prudential.
Still, managed money is still probably easier than trying to sell a stock.