Confronting report warms advisers imminent regulatory changes will address the industry’s ‘sleeper’ issues.

Heather David

Heather David

Listed managed discretionary account operator, Managed Accounts Holdings Limited (MGP) has released a detailed report on the potential impact of regulatory changes to the operation of managed accounts and how advisory firms can prepare for the future.

According to the report – released by MGP subsidiary and titled “The limited discretion clock is ticking” – many advisers and their clients will be affected by proposed changes to be announced by the Australian Securities and Investments Commission this month including the potential removal of a No Action Letter, which some advisers have used as a basis to run discretionary portfolios on regulated platforms under what’s commonly referred to as a Limited MDA arrangement.

David Heather, MGP chief executive officer, said the potential removal of the no action letter would likely force advisers operating Limited MDAs to gain a MDA operator authorisation on their licence to continue their current approach or alternatively, work with an existing managed account provider to implement an arrangement that meets their requirements.

“It’s likely this change will have the greatest impact on the industry but whatever changes are announced and regardless of whether the industry agrees or not, every participant will need to comply with the new rules,” he said.

“Forward-thinking advisers are already making changes to ensure their business processes are efficient, sustainable and compliant, and we’ve seen a recent increase in inquiries from advisory firms keen to understand how we can partner with them to build and implement a customised MDA service, ahead of ASIC’s planned announcement.”

“The purpose of this report is to help advisers unpack the myriad of regulatory issues facing them and lay out their options.”

The report also identified a poor understanding of the rules around implementing retail super arrangements that use a managed account approach, potentially leading to advisers unknowingly acting beyond their authority.

The report stated: “In order for advisers to manage retail super money with discretion, they need to be appointed as an investment manager by the super fund’s trustee”.

“That means advisers currently managing retail super money under a limited MDA or MDA arrangement where they have not be appointed as an investment manager should be issuing a record of advice (RoA) for every portfolio change.”=

Mr Heather said an efficient, practical solution for advisory firms that wanted to compliantly manage retail super money was to partner with an experienced MDA operator with a retail super solution.

“Our goal is to partner with leading advisory firms to drive compliance and practice efficiency by eliminating the need to produce a RoA for every client, every time they rebalance a portfolio or make a change to the assets held in a client’s portfolio,” he said.

“Whether an advisory firm manages portfolios in-house or outsources portfolio management to professional managers, they have a range of choices across Investment and Superannuation, and across a broad range of assets.”

A free copy of the report, The limited discretion clock is ticking, is available here.

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