Advisers urged to transition clients now to beat Limited MDA expiry

Tony Nejasmic

Tony Nejasmic, one of Australia’s largest managed discretionary account (MDA) providers, is encouraging financial advisors using the Limited managed discretionary account (LMDA) arrangements on regulated platforms to transition clients to fully compliant options well in advance of ASIC’s 1 October 2018 deadline.

The removal of the Limited MDA or No-Action Letter from 1 October 2018 and requirement for clients to be migrated to alternate arrangements prior to 1 October 2018 is driving advisers to seek alternative options quickly. One clear alternative option has been the transition to a MDA solution, effectively outsourcing the MDA licensing authorisation. Head of Distribution Tony Nejasmic, who is also responsible for distribution of the Linear solution following the recent merger said: “This is really crunch time for the market and for advisers to avoid a greater pain threshold as the deadline looms. We have seen a 65% increase in interest from advisers leveraging off the Limited MDA as the reality of the removal of Limited MDA’s and no grandfathering of existing positions is making itself known. Additionally, concern around possible future capital requirements, and the increased costs of implementing an in-house MDA is leading advisers towards a fully outsourced MDA approach.”

“With the no-action position on Limited MDAs being in place from 2004, the number of advisers impacted by the regulatory change remains unclear. Discussions with advisers are revealing a lack of planning around transitioning clients to alternative options. With less than seven months to implement an alternate solution, advisers may be unknowingly operating outside of the compliance boundaries or operating two business models just to cater for the changes. There are also no guarantee advisers will have the level of experience required by the regulator to operate a full MDA arrangement themselves if they were to opt for this approach”.

Nejasmic further noted: “Partnering with a licensed MDA Provider can offer advisers a seamless transition in continuing to enjoy all the benefits they and their clients have experienced to date under the Limited MDA arrangement. We are encouraging firms to undertake proper due diligence based on their requirements; whether this be requirement for greater control of the portfolio implementation and execution, custody or Direct HIN, SMA or IMA capabilities with full discretion, and ability to execute equity trades via preferred broker/s.

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