MDA requirements give advisers pause
Financial advisers practising within managed discretionary account (MDA) arrangements may seek the stability of a larger, more established MDA operator in order to meet the Australian Securities and Investments Commission's (ASIC's) proposed guidelines.
As part of its consultative updates to Regulatory Guide 179, ASIC is requiring MDA operators to meet new net tangible asset (NTA) capital requirements.
According to Crystal Wealth Partners executive director Tim Webb, the changes raise the bar for the types of MDAs being set up and "may push advisers to consider moving from a smaller boutique advisory practice" to join a larger firm.
"Advisers are being brought under the same arrangements as MDA operators, so operators will have to look at whether their advisers are competent enough to give MDA advice," he added.
AMP SMSF Administration head of technical services Philip La Greca said that as a result of the changes to capital requirements, the industry may initially see less custodial arrangements because the capital requirements sit too high (at around $10 million).
"You'd expect very few licensees to crack that number," he said.
Webb said the guidelines also provide no consideration in relation to opt-in provisions for MDA clients.
"The client has already decided to be in a discretionary relationship, but on top of that the adviser has to meet FOFA (Future of Financial Advice) fee disclosure requirements which may require a different format and the two-year opt-in arrangement," he said.
"To me it's one or the other — to me [the MDA annual check requirements] are probably more onerous than the FOFA provisions, so surely that will give you some exemption," Webb said.
Recommended for you
Colonial First State has announced the latest manager to join its Edge managed accounts menu, focusing on providing investors with a strategic income.
Rising advice fees has prompted Radar Results to increase its price guide to a minimum of $3,000 per client to reflect the changing shape of the adviser landscape.
Investment consultancy Ascalon Capital has appointed a new partner, who joins from 20 years at Zenith Investment Partners, as well as a new chief executive amid a “bold new chapter” for the firm.
Despite the perception that short-term market events shouldn’t affect portfolio decisions, Praemium research finds 60 per cent of advisers have made portfolio changes in response to US President Donald Trump’s decisions.
