Financial Planning
Limited MDA deadline closes in

Financial advisers operating under a limited managed discretionary account should have made other formal arrangements by now, but the truth is many are still lagging behind, according to IMAP chair Toby Potter.

With the limited MDA changes taking effect on 1 October 2018, it's too late to apply for a full licence as the process takes up to 12 months, Potter told Financial Standard.

The default course of action is to revert to giving "standard advice" client by client, transaction by transaction, he warned. That requires advisers to revert to an "advice only, ROA service model" that might include SMAs, he said.

On August 6, ASIC released an information paper for advisers and licensees who have been using the No-action letter or limited MDA approach for portfolio management.

Potter said the information paper deals primarily with the licensing requirements if the path chosen by a licensee is to apply to become an MDA provider.

When ASIC updated the MDA class order in September last year, one of the changes was to provide a sunset arrangement for the limited MDA client arrangements and advisers could operate under the no-action letter ASIC issued in 2004, he said.

"The letter effectively allowed advisers to operate a form of MDA subject to certain requirements, largely relating to advice and documentation," Potter said.

For advisers who are lagging behind, Potter said there are some generic options available.

They can talk to a specialist platform provider to enable existing models to run as MDA models, subject to due diligence requirements, he said. White labelling on a preferred platform by having models duplicated by preferred platform SMAs in a licensee-specific program is another option.

Potter said advisers might also want to consider a new licensee or platform provider altogether.

"If your current platform provider can't support you, migrate your book to a platform which will provide the managed account service you think best suits your business," he said.

There are platform providers that can make the ROA process efficient and the advice process more automated, he said, adding BT Panorama for example, offers such options.

They could also go wholesale only, but that's not available to many advisers, Potter said.

Read more: Limited MDAASICROAIMAPToby PotterBT Panorama forFinancial Standard
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