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Following up on my recent article, “The Importance of a Well-Structured Investment Program for MDAs”, which was aptly written by AI, specifically ChatGPT, I have decided to dive further into the matrix. My last article received an intriguing comment on LinkedIn which I immediately took as a challenge.  The comment was wondering how ChatGPT would handle explaining the differences amongst the various managed accounts. My knee jerk reaction was not very well, however, once again I have been proven wrong by a greater intelligence. Below is my input and the outcome.

Recently, after putting aside my irrational fear of HAL from a "2001: A Space Odyssey," I have been fascinated with ChatGPT and its ability to write a song in the style of Willie Nelson, use up my about-to-rot food in the fridge with an easier-to-cook recipe than my Marley Spoon, and check my spelling and grammar. After getting the poems and rap songs about my cat out of the way, I thought I would try to get it to do my job and write an article for me. My fear of HAL is now rational! Here is my simple input and the outcome provided. I particularly loved and fretted over the Disclaimer.

DIFFERENTIATING THE UNDIFFERENTIATED

As you know, we’re big fans of the MDA Guru and we often turn to him to help our clients manage the commercial and operational elements involved in using an MDA.

You might also appreciate that we get many queries by advice firms that are seeking a discretionary trading solution, asking about the differences between Separately Managed Accounts (SMA) and Managed Discretionary Accounts (MDA).

It’s a key issue and the differences are seldom well understood.

We could explain, but for variety, we’ve asked our friend at MDA Guru, Peter Turbach, to lay out the differences in terms simple enough for a Compliance Manager to understand.

In the absence of any guidance from the regulators so far please find a link to an article presented by Assured Support and MDA Guru in an attempt to help MDA Providers decide on what to do

As every day passes closer to the 5th of October and without any clear message from ASIC it appears Managed Discretionary Accounts (MDAs) may be required to adhere to the new Product Design and Distribution Obligations (DDO).

At MDA Guru we have received many queries of late with regards to wholesale clients and MDAs. Two main underlying themes seem to be driving this interest;

1. Insurmountable PI increases for some in the financial services industry, and particularly where MDAs are involved, have created cause for some financial advisers and AFSLs to question offering advice to retail clients at all, let alone MDAs.

2. FASEA requirements for some advisers, and particularly older advisers, to upgrade their education, etc., has landed in the “too hard” basket, especially where the adviser mainly has a wholesale client base and only a handful of retail clients.

It is with great pleasure that we get to welcome and add another professional to our team here at MDAGuru. When we add somebody to our team it is because there is a niche area with regards to Managed Accounts that we believe they can fill.

If you are considering providing an MDA service the
purchase of professional indemnity (PI) insurance will be one of your largest
expenses and hurdles that you will face.

Here at MDA Guru we often get asked about ‘Wholesale’ clients and how an adviser can include these clients in a Managed Discretionary Account (MDA) arrangement. Similar to trying to mix oil with water, these types of clients just don’t seem to want to gel with MDAs from a compliance perspective.

The team at MDA Guru is excited to announce a new Associate is joining our team! We are thrilled to announce that Greg Hansen has come on board to help the MDA Guru team complete the final piece in the MDA Puzzle when starting up and maintaining an MDA.

Since we wrote the article titled “The Shades of the Grey in the Managed Accounts World”, we at MDA Guru have received many questions to clarify specifically the grey area with regards to appointed External MDA Advisers. Due to this and to help clarify we will use two different MDA business models;

The Financial Standard Managed Accounts newsletter recently published Peter’s article on the grey areas within the rules around Managed Accounts. This is an excellent source to acquire relevant CPD points to meet your FASEA requirements.

By 31/12/2020, all existing advisers need to pass the professional exam to continue to operate in the industry. FASEA has outlined the examination parameters and nominated Australian Council for Education Research (ACER) to run the exam. The cost of the exam will be $540.

There has been a lot of attention by the law makers and the regulators over the last few years in the advice business. Specifically, in the Managed Accounts World we have seen an impact from FOFA, the updated Regulatory Guide 179 (RG 179) and now most recently the Royal Commission.  As a result, financial advisers, investment managers and MDA providers are like soldiers left walking through a minefield with some choosing to run apocalyptic style for the hills!

Evelyne was recently asked about her views on managed accounts by Assured Support. Managed accounts are certainly an interesting topic and one that has been very much front of mind in the services provided by MDA Guru. Please click here for the full article.

Please feel free to contact MDA Guru if you have any questions.

Some of the most asked questions we receive at MDA Guru are around clarifying the investment management features of IMA’s versus SMA’s. We asked Brian Nash of Merlea Investments to help explain what the differences are and how they can affect your practice. Before deciding on embarking into the managed accounts world we highly recommend advisers understand these differences.

A bit over a year ago ASIC issued ASIC Corporations (Managed Discretionary Account Services) Instrument 2016/968 and Regulatory Guide 179 which regulates the conditions under which managed discretionary account services (MDA services) can be provided.

What is the difference between all these confusing acronyms we hear when investigating managed account solutions?

The difference, once you strip out the common letters "M" for “managed” and "A" for “account” are the following;