Conflicts of interest ‘an issue’ in managed accounts: ASIC

ASIC is concerned about the complexity of the fee arrangements around managed accounts according to Rhys Bollen, the regulator’s senior executive leader of investment managers, and whether the client’s best interests were front of mind for the advisers advocating them.

Speaking at Professional Planner’s Researcher Forum in Sydney, Bollen listed the array of fees ASIC came across during its research into managed accounts, and highlighted the conflicts some of these fees engendered.

“The adviser or their associated entities may themselves receive some or all of these fees depending on the overall structure,” Bollen said on the sidelines of the event. “This may make it difficult in practice for the adviser to robustly monitor the [managed account] service and ensure it remains in the client’s best interest over time.”

Word from ASIC on managed accounts has been a long time coming after it spent more than a year collecting data, during which time the regulator served notices under its compulsory information powers to nine platform operators, seven managed account providers, and two dealer groups.

Conflicts of interest are an issue in managed accounts, Bollen explained, “just like any other financial services sector”. The responsibility for managing and monitoring those conflicts, he said, rests with advice providers and licensees.

“This applies both in the advice-giving stage, product development and in the management and operation of the [managed account] itself,” he said.

Advisers should periodically assess whether a managed account product remains appropriate for the client, Bollen said.

“We expect that this would generally require some comparison between the fees and returns… versus the likely fees and returns that would apply to other investment options that may be appropriate to their client,” he continued.

Future policy changes

ASIC has no intention of releasing a report on their recent research into managed account structures, Bollen said, before indicating the findings from the study will play a role in future policy changes in the area.

“While we don’t intend to publish a report about our research, it will inform our ongoing work in this area,” Bollen added. “We are now considering whether any of the policy and regulatory settings for MDAs and platforms need to be updated.”

Bollen said that any policy update process – “which generally takes about 12 months” – would likely include a public consultation.

The regulator’s attention has been brought to 39 compliance and enforcement matters in the last three years, Bollen said. ASIC will continue to monitor the managed account space, he added, and will take appropriate action when needed.