‘No Shield or First Guardians’ in managed accounts

The head of the Institute of Managed Account Professionals says scrutiny of managed accounts is unwarranted given their track record.

IMAP chair Toby Potter said that over the past couple of decades there have been major collapses from managed investment schemes – for example Trio Capital, Dixon Advisory, as well as the recent $1 billion Shield and First Guardian collapse – but none in managed accounts.

“There’s been no Shield or First Guardians in the over 25 years that managed accounts have been operating,” Potter told the Professional Planner Managed Accounts Decoded podcast.

“If you look at AFCA’s complaints there are no complaints about managed accounts, and I mean zero. 100,000 complaints about financial services, there are zero about managed accounts.”

North head of managed portfolios and investments Dipin Arora said the tragic events of the $1 billion Shield and First Guardian collapse has made him a stronger advocate for managed accounts.

“You’re not only adding layers of fiduciary responsibility, you’re adding layers of investment governance that benefit members and advisers and REs and businesses to provide a product that is been reviewed through multiple lenses and designed through multiple lenses,” Arora said.

“You take what’s going into the managed account, the underlying building blocks, so your funds and ETFs that make up a managed account and portfolio, that goes through a DD [due diligence] process in its own right.”

He added that the design, objectives, benchmarks and purpose of the managed account are also reviewed.

“When you add those layers, you’re hoping that you’re mitigating a lot of the risk associated with bad actor funds or poor-quality funds ending up in a portfolio as such. Are you completely risk proof? No, there’s always going to be a risk.”

IMAP/Milliman’s latest census data shows managed accounts are nearing the $300 billion threshold with $292.9 billion in funds under management as of 31 December 2025. Over the past year, that’s been a 25.8 per cent increase from $232.7 billion.

ASIC revealed in its FY26 corporate plan last year that it would be conducting a surveillance of AFSLs recommending and offering managed accounts to retail clients, which will take into consideration compliance with general licensee and advice conduct obligations.

In November last year, Professional Planner revealed that ASIC began issuing 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.

The scrutiny of managed accounts has ramped up after the regulator was dormant on the sector for the past few years.

ASIC previously launched a review into managed accounts which was scrapped during the Covid-19 pandemic, in a move widely misconstrued as the granting of a clean bill of health.

But an investigation from Professional Planner uncovered documents released under freedom of information laws last year confirming that ASIC had serious concerns about managed accounts.

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 managed discretionary account (MDA) sector and that conflicts of interest could easily arise through vertical integration.

“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.”

During the podcast, Potter said ASIC suffered the same issue as all government organisations in that there is frequent turnover that stifles the progress of projects.

“They have a moderately good understanding of the managed account space,” Potter said. “They’ve had deep engagement with the platforms lately.”

Arora said ASIC has been talking to asset consultants as part of the review, and eventually to licensees as well.

“From an RE perspective, they’ve asked for a lot of information as they look through managed accounts and better understand the scope and where in the spectrum does everyone sit,” Arora said.

“It’s a scale question. Managed accounts are hitting a scale and growth rate, a sustained growth rate over the last 10 years.”

Investment Trends/State Street data shows 60 per cent of advisers are using managed accounts with another 13 per cent further considering doing so.

That same research found seven in 10 advisers that use managed accounts found simplified portfolio management as the top benefit, while six out of 10 found improved efficiency as another benefit.

However, Arora concedes that managed accounts may not be suited for every adviser and client.

“Where you’re looking at scale that’s one element, where you’re looking at customisation and almost to a point where it’s become hyper-personalised to either a client or cohort… that’s where managed accounts are coming to the party more recently and providing that diversified choice from a design perspective,” Arora said.