ASIC’s 2013 proposal to change requirements around limited managed discretionary account (MDAs) platforms is now on hold, prompting an industry insider to recommend interested advisers use the opportunity while there’s still time.
Claire Wivell Plater, the managing director of The Fold Legal, told Wealth Professional
that now that the proposal is on hold it means that even if ASIC decide to follow through with it in the near future it would probably be subject to a significant transition period, potentially giving advisers until at least 2016.
“If in the past they were thinking they had to wait, it’s best to jump on now rather than later, because there’s probably time to get their operations established,” she said.
MDAs enable advisers to quickly rebalance their clients’ portfolios allowing them to, for example, quickly take advantage of a momentary over or under valuation of a stock, or exercise a corporate action such as a rights issue or share buyback.
And unlike full service MDAs, limited MDA services are provided through a platform, which takes care of administration, custody and reporting.
“The attraction of MDAs for advisers is the operational efficiencies they offer,” Wivell Plater said. “There is no need to obtain a client’s consent in advance to simply rebalance a portfolio. Provided advisers can operate them efficiently, [they] can be an excellent way for advisers to add value.”
Currently advisers who provide a limited MDA service must obtain a Power of Attorney from the client authorising them to manage the investment within agreed parameters, however they don’t need a specific MDA authorisation on their AFS licence.
However among other things the ASIC proposal would mean advisers are required to have the specific authorisation.
But the long and drawn out consultation period, which has been paused twice, has caused much uncertainty within the industry and has put advisers who would be otherwise interested in using an limited MDA off due to the potential of considerable restrictions, said Wivell Plater.
“I think it was put on hold last year initially because it was very complex, but more recently it’s because of uncertainty around the regulative climate,” she said. “We’ve got the Financial System Inquiry, reforms, and I think ASIC wants a bit more certainty about the way the world looks before they go forward.”
Wivell Plater, who said a month ago she would have advised clients against starting to offer the limited MDA service, is now encouraging interested parties to get on board in light of the pause.
“I imagine people would be excited about it,” she said. “Putting a toe in and doing it within a platform is a good stepping point to gain the experience required [for an MDA].”