Less jargon and the answers to six questions can help to demystify managed accounts

Financial planning practices must answer six big questions before they can accurately say whether managed accounts make sense, the founder and principal of T&C Consulting, Tony McDonald, says.

McDonald says the managed accounts sector is riddled with jargon, and a first step to getting a clearer picture is to cut though the conflicting and confusing terminology. Managed accounts masquerade variously as individually managed accounts (IMAs), managed discretionary accounts (MDAs), separately managed accounts (SMAs), unified managed accounts (UMAs), and other three-letter acronyms besides.

“One of the first things we need is common language, “McDonald (pictured) says.

“We need to look at the managed accounts space in a structural sense, [in a way] that helps put things in the right box, so you can understand them.”

McDonald says many businesses have been put off even considering a managed account offering simply because it is unclear what a managed account actually is, let alone the demands an offering may place on a practice’s existing resources and structure. But he says answering six key questions “when you are thinking about going into, or changing, a managed account offering” can make the situation much clearer.

To help practice owners answer these questions, the Institute of Managed Account Providers (IMAP) is staging a workshop in Sydney on April 8, and a webinar for people unable to attend in person, aimed at demystifying managed accounts and examining how, if done the right way, the service can add value to a financial planning business and produce better investment results for clients. Professional Planner is the official media partner of the workshop and webinar. The workshop is sponsored by IOOF.

1. Does a managed account offering suit your way of doing business?
2. What do you already have in place on the administration side of the practice? And the flip-side to this question: what are you lacking on the administration side?
3. What do you already offer on the portfolio management/investment side of things? And what is lacking in your offer?
4. What are you currently authorised to provide advice on? And what are you not authorised to provide advice on that you might need to be?
5. How much do you want to charge for the service you plan to offer?
6. What costs do you have – and what resources do you have – in your practice already, and will you need to add or subtract from these?

McDonald says that in the space of about 40 minutes, participants in the workshop and listeners to the webinar will start to understand “how these things hang together; and gain a better understanding of the big issues that they need to walk up to”.

McDonald says the content is “pitched at the person who has a reasonable understanding, but is struggling to get onto the right decision process”.

“We’re going to take out all of the white noise,” he says.