The corporate regulator has issued ‘please explain’ notices to licensees and separately managed account (SMA) providers seeking information about any sales and revenue targets, inducements and benefits to offer SMAs to retail clients.
Professional Planner can reveal that the Australian Securities and Investments Commission has commenced the probe into the booming $250 billion managed accounts market it foreshadowed in its FY26 corporate plan.
An ASIC spokesperson confirmed the watchdog has begun a “surveillance” project of managed accounts offered or recommended to retail clients by advice licensees. “Our surveillance will focus on governance frameworks, management of conflicts of interest, and outcomes for consumers,” the spokesperson said.
The revelation comes on the eve of the Professional Planner Researcher Forum, which will examine the rapidly shifting landscape for investment research, governance and consulting amid the fallout from the disastrous Shield and First Guardian scandal. ASIC Commissioner Alan Kirkland is scheduled to address the forum on the regulator’s key priorities for financial advice suppliers and “gatekeepers”, including managed account providers.
It is understood that letters issued by ASIC officials this week demand detailed and potentially commercially sensitive information about SMA offerings. This includes multiple years’ worth of data on clients and assets under management invested in SMAs, as well as full client advice files for advice recommending SMAs to clients.
The regulator is expected to focus especially on any sales targets, agreements or potential inducements or benefits related to SMA recommendations, especially where the product is operated by an in-house or related party investment entity.
Investment product commissions and kickbacks were eliminated by the Labor government’s Future of Financial Advice reforms to the Corporations Act in 2012, albeit with some grandfathering provisions remaining at the time, alongside the introduction of the best interests duty. However, the extent to which revenue generated by advice providers for administering or managing managed accounts and portfolios is considered conflicted remuneration remains ambiguous, with little case law on the matter.
But the ASIC probe is not only concerned with possible related party conflicts of interest. It is understood it will also examine more commonplace relationships between licensees and third parties collaborating on SMA products.
Recipients of the ASIC letters have told Professional Planner on condition of anonymity that the regulator has demanded to see all “contracts and correspondence” between them and SMA investment partners.
The probe could therefore capture commercially sensitive data relating to a large number of industry players including licensees, advice practices, platforms, responsible entities, asset consultants, investment committees and traditional asset managers, given the importance of SMAs for the distribution of financial products via retail and wholesale advice channels.
Two sides of the coin
According to the Institute of Managed Account Professionals, there was $169 billion in assets held by SMAs as at June this year, up from $129 billion just 12 months earlier. The sector – which is concomitant with the near-universal uptake of adviser-facing IDPS and superannuation platforms over the past decade – now dwarfs the managed discretionary account (MDA) sector, which is considered a service rather than a financial product under the law, triggering additional and separate licensing obligations, among other differences.
ASIC’s specific surveillance of the popular SMA segment is significant given its past focus on the MDA sector, which some MDA providers had seen as narrowly and unfairly applied to just one iteration of the broader managed accounts market.
Following the Hayne royal commission – and testimony of disgraced former celebrity adviser Sam Henderson in particular – ASIC commenced an investigation into the MDA market in 2018, resulting in licence conditions being temporarily placed on AMP’s now-defunct advice operations.
But the regulator suspended the project at the height of the Covid-19 pandemic in a move widely misconstrued as the granting of a clean bill of health.
A trove of documents eventually released to Professional Planner under freedom of information laws in February this year confirmed ASIC has been on the cusp of an intervention into the market in early 2020 after its probe uncovered a number of serious concerns.
A draft edition of a consultation paper, which was scheduled for distribution in April 2020 but never published, detailed a number of concerns including “low barriers to entry” in the MDA sector.
“We identified that it is possible for a licensee to offer an MDA rather than a registered scheme to circumvent the more onerous financial requirements that apply to the responsible entity of a registered scheme,” the paper stated.
“We are concerned that the current financial requirements for an MDA provider may not be adequate and are no longer fit for purpose.”
An internal report labelled “private and confidential” and dated September 2019 argued the MDA market had “increased risk of misleading and deceptive past performance figures” compared to other financial services.
It also concluded MDAs could be subject to “conflicts relating to vertical integration, remuneration and conflicts rising from product manufacturer [sic] also being involved in product distribution – via in-house channels, such as related platforms, dealer groups and financial advisers”.
In a response, IMAP chair Toby Potter wrote that the regulator’s concerns from the royal commission era did not adequately factor in the consumer benefits of managed accounts or commercial developments in the market since then.
The Professional Planner Researcher Forum will take place in the NSW Blue Mountains on 2-3 December 2025. A limited number of tickets for eligible advisers, licensees, asset consultants or researchers are still available.
