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
Iress chief executive Marcus Price has shared how he is seeing “massive tailwinds” in financial advice in Australia, with the firm turning its attention to digital advice following the completion of its transformation project.
Licensee Centrepoint Alliance has shared its first half FY25 results with strong performance coming from the acquisition of Financial Advice Matters.
Professional services firm AZ NGA has announced a group chief financial officer, who previously spent six years as Fitzpatricks Financial Group’s CEO.
Clime’s disposal of advice licensee Madison “needed to happen yesterday”, managing director Michael Baragwanath has told Money Management, as he concludes a severe cost-out period at the business.
