Listed managed discretionary account operator, Managed Accounts Holdings Limited (MGP) has cautioned advisory firms operating a Limited MDA arrangement to brace for imminent regulatory changes in the group’s 2016 Annual Report, as it prepares to launch a direct, non-custody solution to help advisers meet tougher conditions expected to be announced by the Australian Securities and Investments Commission next month.
The annual report of MGP also revealed the group was on track to launch its 50th private label this quarter, after posting a 36 per cent increase in net profit before tax (NPBT) of $1.112 million for the year to June 30, 2016, driven primarily by strong support from the independent financial advisory (IFA) market.
In a joint statement, MGP Chairman Don Sharp and Chief Executive Officer David Heather said proposed changes to the operation of MDAs presented a unique opportunity for MGP to assist advisory firms that wanted to build and manage bespoke client portfolios in a compliant and efficient manner, and exercise discretion when rebalancing portfolios and executing trades through their broker of choice. To that end, MGP will launch a revolutionary non-custodial MDA Service as it continues to champion innovation in the managed account space.
“Not all IFAs hold assets in a custodial structure, in particular licensees offering Limited MDA Services or those managing portfolios on behalf of clients who do not use platforms,” Mr Sharp said.
“With this in mind, MGP has been designing and implementing a direct ownership solution which will enable the existing MGP operating model, technology and administration system to exist without the need for assets, particularly ASX-listed securities, to be held in custody.”
News of the non-custodial Service comes as MGP is set to go live with a high interest rate at-call cash facility in September. The Service will enable investors to earn interest on their cash at comparably favourable rates with leading Cash Management Accounts in the market. In addition, the group plans to offer non-custody fixed interest with higher interest rates, and has recently finalised the development of its unique Retail Super and Pension offer.
Consequently, MGP is in the process of implementing Retail Super and Pension Services for ten licensees, which is expected to significantly increase the group’s FUA.
Looking ahead, Mr Heather cited research which showed the managed account market in Australia is forecast to hit $60 billion in FUA by 2020 driven by investor demand for more flexible, transparent and competitive solutions.
“Our offering and business model is filling a gap in the market for a customised MDA Service that enables advisory firms to manage portfolios internally, deliver a consistent client experience and the same high level of service across their client base,” he said.
“Many advisory firms that look after sophisticated, high net worth investors have the authority and trust of their clients to manage portfolios with discretion, and they need the technology, processes and governance structures to do that in an efficient and scalable way across non-super, SMSF and retail super which we have the ability to provide.”
“Firms that try to continue managing portfolios on a client-by-client basis with no discretion will get left behind.”
