In light of the long awaited revised ASIC Managed Discretionary Accounts (MDA) Regulatory Guide (the Guide), ASIC has come to recognise that Managed Accounts can operate in many different ways. In short, the Guide covers three distinct business models; MDA Providers (currently known as ‘MDA Operators’ such as Mason Stevens, current Limited MDA Providers, and Advisers that recommend an MDA service but are not MDA Providers. The ASIC Guide provides guidance on the compliance of these three models.
Mason Stevens Managing Director, Thomas Bignill, said “The update provides some clarity for the MDA market and we believe it will strengthen the way Advisers deliver advice to their clients, and further enhance the industry from a compliance point of view. In particular, those who have been operating under a Limited MDA arrangement, now have a clear pathway in which to transition their practice. Many of these may be seeking to partner with a full MDA provider rather than get into the full compliance regime which may be costly both from a time and money perspective. Limited MDA arrangements came about as Advisers wanted to switch client investments efficiently without providing a Review of Advice (RoA).”
“Our view is that Advisers must understand what they want to achieve and what the needs of their clients are so that they can identify the best approach that will be a sustainable business decision. Things to look at include what their investment philosophy is, what assets they want to invest into, eg direct holdings in global shares as well as domestic, minimising compliance and risk as well as expenses. For many they may not know where to start, so we encourage Advisers to speak to colleagues who are already using managed accounts or contact us. We can help guide them through what they need to consider in building a managed account service into their business.” said Mr Bignill.
Key highlights for Advisers on the ASIC MDA Regulatory Guide:
• Advice must be given in respect of an MDA and that advice must be ‘personal advice’.
• Annual reviews remain however ASIC has clarified that the advice document can be a Record of Advice (or an SoA if required).
• Acting in the best interest of the client is a separate and additional obligation when recommending an MDA to the current best interest requirements. Advisers must consider all the different characteristics and services associated with an MDA.
• If providing non-limited recourse products (eg instalment warrants) in an MDA portfolio, Advisers must obtain specific written consent from each client to invest in these products.
• Professional Indemnity – Advisers will need to amend their current AFSL to include MDA services (if not already authorised).