Where do I start? What do I do first? and what do I need to consider?
These are the questions that often get asked by people going down the path of looking at Managed Accounts for their business. If you want to learn more about the benefits of Managed Accounts for your firm, you could check out our recent blog. In our experience, here are the core steps that you need to consider.
Step 1 – Start with your value proposition and what role you or your business wants to play in the advice you provide your clients.
For some advisers, providing strategic advice is their key role and some advice on asset allocation, but they don’t play any deeper role in managing their clients underlying investments, be it selection or ongoing management. It’s unlikely they will ever want or need to create their own managed account service.
Meanwhile, for others, their value proposition extends further, and they tend to play a pivotal role in the creation of portfolios for clients and the ongoing management and oversight of those portfolios and investments. They may be looking for a way to deepen and strengthen their investment service and the client experience. They’re looking at how they manage and advise on clients’ investments and want to do so in a more robust and efficient way.
If an adviser provides an active and dynamically managed portfolio investment service, then they may be looking for a more effective way to make timely changes to clients’ portfolios while also reducing the administration and compliance burden that comes with suggesting and implemented portfolio changes or rebalancing.
Client first – As we have emphasised in other blogs, make sure you always come back and consider the client’s needs – this is paramount – before you consider anything. How are their needs, experiences and outcomes going to improve by employing a managed accounts solution? What is their current experience and what are you trying to improve?
Ask yourself these questions:
1. What role do you want to play in creating and overseeing / managing the managed account service?
2. Do you need your own service, be this a private or white label? or
3. Do you simply make available third party managed account solution for your clients to invest in?
Each of these options has significant differences in the time, effort, and investment you incur and the role and responsibility you take on.
In our work with practices, we start by conducting a review of their business and ask these very questions, to help them uncover and determine what’s important to them, their business and their clients. We help them work out what issues and problems they are trying to solve and then guide them and oversee the process so that they can fully understand the options available to them.
Step 2 – Once you have determined what you think you need in a managed account service, we suggest you speak with your Licensee, unless you hold your own AFSL.
If you’re an authorised representative of a Licensee (or dealer group) then it’s critical that you speak to them as soon as you have some idea of what you are trying to achieve and deliver to your clients. You simply cannot progress effectively, without their involvement, as there are a number of legal, regulatory and “licensing” issues which you need to talk through with your Licensee to determine whether indeed you can deliver what you want through your current Licensee arrangement.
Licensees are likely to regulate your options and may suggest (or stipulate) that you utilise one of the managed accounts arrangements or solutions they have on their approved product list. This is a very important step, and depending on the licensee you are with, it may uncover roadblocks or longer term strategic issues that you need to consider and deal with.
Step 3 – Legal issues
Whether you are authorised through a third party AFSL or hold your own AFSL, there are numerous regulatory and legal issues you need to consider. Your licensee will either advise you on these, or you will need your own independent legal advice, but there are a myriad of regulatory, licensing and legal issues you need to consider. We have assisted our clients to seek out this advice from trusted and reputable providers. We remain involved every step of the way, where our clients need that level of support.
One such legal question, right up early in the consideration phase, is the legal structure you wish to adopt, or are able to adopt, in order to offer your clients a managed account service. For instance, whether you offer the service through a Managed Discretionary Account Licence (commonly referred to as an “MDA”) or whether you employ a Managed Investment Scheme structure (“MIS”) through a registered product disclosure statement, are options you need to explore.
The answer may depend on factors you may not control – like whether your Licensee holds an MDA Licence or is prepared to allow its authorised representatives to operate under its MDA, and if so, under what conditions, restrictions and so on. The platform you are using, or end up using, will also determine this as they may only offer one structure over another.
These are only the first steps and issues you should consider. There are other considerations, like thinking about an investment committee, whether you partner with an asset consultant, and the technology solution or administration platform best suited to deliver and execute on your requirements.
Additionally, and importantly, seek independent advice. There are many service providers in the market who claim to know a lot about managed accounts and what may be best for your clients and your business. In our experience, some do have a lot of good material and knowledge, can offer great support and can be very helpful. However, always remember, that most service providers have a chosen business model or option that works for them, and so that is what they offer and what they promote as being the best for you. This may not be the best option for you, so seek independent advice from a specialist who isn’t conflicted from helping you to uncover the options available to you.
That’s where we come in at Intama. We are independent consultants who have assisted our clients with managed account service to navigate through the maze of issues they need to consider, while they do what they do best, looking after their clients and their business.
Contact us, if we can be of assistance to you.
