Managed discretionary account (MDA) providers who operate through a regulated platform have 18 months before they need to run in line with the revised MDA services framework but will need up to nine months for the changes to be processed by the corporate regulator, according to The Fold Legal.
The law firm said in a blog it had not seen sufficient evidence of MDA providers changing their processes and urged them to hasten the process to meet the first deadline of 1 October 2017.
Licensed MDA providers compiling a financial services guide (FSG) would need to include names and contact details of external MDA providers, and fees and costs in a similar format to a product disclosure statement (PDS), as well as the risk of non-limited recourse products, and how clients can provide instructions on corporate actions if the MDA providers allow them to do so.
Providers would also need to identify conflicts of interest that could result from the MDA service and document policies for tackling them, implement procedures for monitoring their custodian and implement robust procedures for terminating MDA contracts.
MDA advisers who advise on MDAs not on a regulated platform would need to implement processes to provide their initial statements of advice (SOAs) recommending the MDA service to the MDA provider, who would need to be satisfied that the service is not inappropriate to the client.
Advisers would also need to check that their FDS accurately discloses the MDA advice fee.
The Fold Legal managing director, Claire Wivell Plater said: “If the investment management service is a centralised function which doesn’t provide personal advice to individual clients and charges a separate fee to your financial advice fees, you don’t need to include the investment management fee in your FDS”.
The new framework revoked the “no action letter”, which allowed limited MDA services to be provided within platforms. Australian financial services licensees who wished to continue providing these services within a platform would need to apply to vary their licence on or before 1 October 2018.
