MDAs to aid independent comeback

The rise of managed discretionary accounts (MDAs) may be conducive to a resurgence in the non-aligned financial advice market, compliance experts have predicted.

With some industry commentators predicting promising signs for the independent financial adviser (IFA) market post-FOFA, consultant Kate Humphries, general manager of Netwealth-aligned Pathway Licensee Services, says MDAs present an opportunity particularly to non-aligned advisers.

“Operating an MDA is increasingly something advisers want to offer to their clients…and they are something that many institutional licensees do not want to get into,” Ms Humphries told ifa.

“So they could be an opportunity for self-licensed advisers, particularly those [that provide advice to] clients who spend a lot of time away from their principal place of residence.”

While there is a “regulatory issue” in that MDAs are currently being scrutinised by ASIC, Ms Humphries said these tools can be “very appealing to clients, especially high-net-worth clients”.

At the same time, she said that clients utilising MDAs under advice from their financial planner will need to “understand exactly what their investment mandate is” even if they are not involved in the everyday decision making of their investment portfolio.

Financial services lawyer Sophie Gerber of Sophie Grace Compliance has also seen interest in MDAs from advisers interested in obtaining their own AFSL, and thinks this trend will continue.

“The really entrepreneurial [advisers] often want to set up their own MDA/fund structure,” she said. “We are getting a lot of questions about MDAs – how to set one up and run one – and I think MDAs are going to make a resurgence.”

However, Ms Gerber also cautioned that MDAs are “compliance heavy” and that advisers should be aware of what they are getting into.

In March, ASIC released Consultation Paper 200 Managed discretionary accounts: Updates to RG 179 (CP 200), which proposed a number of changes to the guidance and relief for MDAs.

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