What is a managed account, really?

I’m confident that IMAP will be able to assist the advice profession go through a fundamental restructuring of its service and commercial model. IMAP’s mission, on behalf of the managed account profession, is: Information, Education and Representation of Managed Account Professionals.

• In this inaugural edition, you’ll find items which speak to all three aspects of that mission. You’ll find:
• An article about the work we do in quantifying the size of the managed account market through the six monthly FUM Census;
• Claire Wivell Plater shares her thoughts on the revised MDA services regime;
• A profile of a very successful managed account service – Crystal Wealth Partners, and its principal, John McIlroy, who shares his insights on how to develop a valuable and efficient business; and
• Options for advisers thinking about developing their platform-based LMDA service in a way which suits their business.

The variety of content speaks to the sweeping implications for an advice business moving to a managed account structure – whether it’s SMA, MDA, IDPS-based or one of the other structures that have evolved.

Which leads me to the question: What is a managed account, really?

Since 2004, at every conference, seminar, PD day and working group, somebody says: “There’s too much jargon in the managed account business – and I don’t know what any of it really means.”

So, instead of another attempt to define the difference between IMAs, SMAs, MDAs and so on, I think it’s time to set out the defining characteristics of managed account services and products.

The proliferation of terms and the legal structures that underlie those terms mean that individual organisations have developed their own approaches within the Corporations Act and ASIC regulations in order to enable them to meet their clients’ needs using their own capabilities and resources.

If anything, growing familiarity with the services and evolving technology means there’s likely to be more, rather than less, commonality of service and structure. But they are going to share a number of common elements:

• Serving predominantly retail investors – so, not institutional mandates. However, some retail investors have large portfolios and there are a couple of SMSFs with over $100 million;
• Given under personal advice – so, not robo;
• Operated under a standard legal structure that incorporates specific discretions  – agreements, contracts, PDS;
• Based on standardised portfolio models, but with individual constraints or preferences to the extent the service and technology support these;
• Administered by a central team – getting away from adviser back-office piles of paper;
• Delivered by purpose built technology that probably isn’t Excel; and
• Where specific assets are identifiable to an investor, because pooling is against the law.

So, whether it’s an MIS scheme, SMA, IDPS, IDPS-like, MDA or some other variant – managed account services are going to meet these requirements. It’s a long way from the balanced unit trusts of the 1980s. But that’s because the advice profession has come a long way from the advice of the 1980s.

IMAP is looking forward to working with you to develop managed account services. If you think there’s something IMAP should be doing, don’t hesitate to contact me at toby.potter@imap.asn.au or on 0414 443 236.

You can take advantage of IMAP’s activities by ensuring your organisation is a subscriber – either as a Dealer Subscriber or a Corporate Subscriber.

All the best.

Toby Potter

Chair