The compliance case for strong governance in managed accounts has been well made, and as Zenith's Head of Legal and Compliance Manuela Sikos outlined in February, governance frameworks, conflict management and regulatory transparency are now baseline expectations, not differentiators.

But compliance with governance standards and genuine investment quality are not the same thing. A managed account provider can satisfy every regulatory expectation yet still manage investment risk poorly. For advisers who are building client portfolios around a managed account solution, the more important question is this: how well does your provider actually manage the investment risk inside the portfolio? That question is harder to answer than it looks and deserves more attention than it typically gets.

The difference between governance compliance and investment risk management

Governance compliance is about structure and process: are roles defined, are conflicts disclosed, are decisions documented? These are necessary conditions for a well-run managed account and they tell you whether a provider has the right foundations in place.

Investment risk management is about understanding the known risks, managing them deliberately and reported transparently. It’s this process which leads to building resilient portfolios that have the greatest chance of achieving their targeted objectives. In practice, this distinction matters most when markets are under stress. Strong governance structures hold providers accountable and determines whether the right decisions get made when the pressure is on.

What rigorous investment risk management looks like

When assessing how well a managed account provider handles investment risk, look beyond headline returns. The more revealing question is whether those returns were achieved with a proportionate level of risk, and whether the portfolio stayed within its mandated constraints throughout.

These are the questions worth asking:

  • Is there a defined investment risk framework? Look for a documented methodology that governs how risk is measured, monitored and escalated at the portfolio level, not risk managed informally by the investment team.
  • Does risk oversight sit separately from portfolio management, with genuine authority to challenge investment decisions? Or does the same team that constructs the portfolio also assess whether the risk taken was appropriate?
  • How are portfolios stress tested? Is there evidence the provider actively models tail risks and considers portfolio behaviour under adverse conditions, not just normal market environments?
  • What does investment risk reporting actually look like? Are advisers and clients given meaningful visibility of the risks taken to achieve returns, not just the returns themselves and is that reporting produced objectively?
  • How are investment decisions documented and reviewed over time? Is there a clear record of why positions were taken, what risk parameters governed those decisions, and whether outcomes were consistent with the portfolio's stated mandate?

These are not compliance questions; they're investment management questions. The answers reveal whether a provider's governance structures are producing disciplined, risk-proportionate decisions, or whether they exist largely on paper.

How Zenith approaches investment risk in practice

At Zenith, investment risk management is built into the portfolio construction process from the outset, not applied as an overlay after decisions are made. Our managed account portfolios are informed by our respected investment research team which retain active oversight and ratings across over 1,000 investment products. That research infrastructure means the investment insights underpinning our portfolios are grounded in direct, ongoing engagement with the market. We’re not relying on secondary analysis or third-party data when assessing the risk profile of an underlying investment.

Investment decisions are made through a structured Investment Committee process with defined membership, documented rationale and clear accountability. Risk oversight functions separately from portfolio management - not to override investment decisions, but to stress-test them. Our risk function has the standing to challenge assumptions, surface alternative perspectives and push back on the investment team as a matter of process, ensuring decisions are pressure-tested before they're made, not reviewed after the fact.

Advisers and their clients receive transparent reporting on both performance and the investment risks taken to achieve it. Our reporting reflects the actual risk inside the portfolio, not a curated view of outcomes. Our in-house legal, risk and compliance functions have grown alongside the business for over a decade, building deep expertise in the regulatory and operational requirements specific to managed accounts. Those functions work in close coordination with the portfolio solutions team, not as a separate compliance layer, but as an integrated part of how we manage portfolios responsibly.

Why this matters for your practice

For advice licensees, the quality of a managed account provider's investment risk management has a direct bearing on the quality of the advice delivered under your banner. A provider that manages investment risk rigorously with documented processes, objective oversight and transparent reporting gives you the evidence base you need to demonstrate a reasonable basis for product selection. It reduces the risk of portfolio outcomes that are difficult to explain to clients and it strengthens your position if those decisions are ever scrutinised.

In an environment where regulatory expectations for managed accounts are continuing to develop, the providers who will hold up to scrutiny are those who have embedded genuine investment discipline into their operating model, not just those who have ticked the governance boxes.

Learn more about Zenith's managed accounts

If you would like to understand how Zenith's investment risk framework supports your practice's portfolio construction and due diligence obligations, speak with our Portfolio Solutions team.