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
While the last several months have seen increased market volatility, particularly in the US, advisers said there are multiple reasons why there has been an increase in defensive asset flows.
Scarcity Partners believes the dynamics playing out in the managed account and outsourced chief investment officer market are “here to stay” based on positive developments in financial advice.
Former executive chairman of failed stockbroker BBY, Glenn Rosewall, has been charged with aiding, abetting, counselling or procuring BBY’s dishonest conduct in relation to a financial service.
Fidelity International research has revealed Australian investors are significantly more optimistic about the market outlook and feeling more comfortable than their APAC peers, despite ongoing market volatility.
