Implementing managed accounts into your practice

Navigating the managed account maze

Managed accounts are becoming increasingly popular with advisers in Australia but determining the right option for your business can be difficult.

There are a number of factors you should consider. 

1. What are your business objectives? Do you want to outsource portfolio construction for some or all of your clients?  Is increasing efficiency in portfolio maintenance a goal for your practice?
2. Given the ASIC removal of the LMDA no-action position, are you considering whether to obtain your own MDA license or would you prefer not to? There are solutions for both these scenarios.
3. What is your level of interest or capability in portfolio construction? Do you have an investment philosophy, how do you approach asset allocation and investment research and do you select the individual investments within each portfolio or would you rather collaborate with a professional investment manager/consultant? Again there are options that allow to do either.

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What are the options?

There are a number of different terms thrown around in relation to managed accounts but regardless, there are some defining characteristics of managed accounts which include:

• A recognised legal structure
• The element of personal advice
• Discretionary management of investments
•  Model based, centralised controls and systematic approach to portfolio management
• Transparent ownership and visibility of the assets forming part or all of the client’s portfolio.
• Portability of assets (ability to transfer in/out of the managed account)
• Efficient administration.

There are two primary strands of managed accounts emerging –

• Managed Portfolios, also called Separately Managed Accounts (SMAs). Panorama’s BT Managed Portfolios are an example of this type of product. This structure operates as a conventional Managed Investment Scheme with a Responsible Entity arrangement in place and a Product Disclosure Statement issued.
• Managed Discretionary Accounts (MDAs). ASIC describes¹ an MDA service in the following way:  
  • “An MDA means a facility, other than a registered managed investment scheme (registered scheme) or an interest in a registered scheme, with the following features:

(a) a person (MDA client) makes contributions;

(b) the client portfolio assets are managed on an individual basis by another person (MDA provider) at the MDA provider’s discretion, subject to any agreed limitation; and

(c) the client and the MDA provider intend that the MDA provider will use the client portfolio assets to generate a financial return or other benefit for the client.”

For both Managed Portfolios and MDAs, you may wish to outsource the investment selection to a professional investment manager/consultant or you can opt to create your own portfolios. Be aware if your preference is to construct your own portfolios, there are specific compliance requirements that must be met.

Get support from people with the expertise

The final consideration for navigating your way through the managed account maze is to choose a strong partner. Someone who has experience in the managed account industry and has a full range of managed accounts solutions available. BT, with well over 25 years managed account experience is a good example.

More information on managed accounts can be found at btpanorama.com.au/managed-account.

1. From Regulatory Guide 179 “Managed Discretionary Accounts”, page 5.