The terms below are to assist members of the financial services community with their engagement with clients and services providers and for the benefit of investors generally. There are references to common legal terms although this is not exhaustive and care should be taken when considering legal obligations
A managed account service will contain three main components – Services, Elements and Roles. The definitions below are divided among those three areas.
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Term |
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Definition |
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Managed Account |
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Generic definition for a service which has the following characteristics · Delegation of the management of a portfolio of assets by an investor to a suitably authorised manager, generally at a cost · On the terms set out in a standard offer document / agreement rather than an agreement specific to a single client · Where the administration of the portfolio is an integral part of the overall service |
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Managed Portfolio |
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Alternative term for Managed Account |
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Managed Investment Scheme (MIS) |
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A defined term in The Corporations Act. A managed account offered in the form of a MIS, unlike a unit trust, is not unitised and nor will the assets be pooled among investors. RG179.2 notes an MDA can be offered as a registered MIS under Ch 5C. |
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Separately Managed Account (SMA) |
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Generally offered as an investment option through a platform, although this is not always the case and this structure can be offered as a stand-alone investment product. On platforms, usually offered as a registered MIS, hence including: · A PDS as the offer document · A Responsible Entity as the issuer, and · May be recommended on the basis of General Advice rather than Personal Advice However, there are platform SMAs which are not MIS in structure. |
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Managed Discretionary Account (MDA) |
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A service which is offered in accordance with LI 2016/968 and RG179, so features: · An MDA Provider · An MDA agreement · An Investment Program · Must be recommended with Personal Advice to retail clients · Assets may be held in custodial arrangements – for example on a platform – or in client’s own name. |
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MDA Agreement |
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The agreement between the MDA Provider and the Client setting out the terms on which the MDA service will be offered. See the RG179 definition below. |
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Investment Program |
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The description of how the discretionary assets in an MDA service will be managed. See the RG 179 definition below. |
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Individually Managed Account (IMA) |
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Portfolio management where a single client’s assets are managed separately from those of other clients, and not necessarily in accordance with a model. May be run under an MDA structure or under a Power of Attorney. Generally, now only offered to Wholesale investors |
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Limited MDA / “No Action” Service |
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Service created by ASICs letter to IFSA / FSC in November 2004 and banned with effect from October 2017. Under this an MDA service could be operated on a regulated platform without the need for the AFSL to have specific MDA Provider authorisation. |
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Term |
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Definition |
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Investment Model |
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A notional combination of assets, managed in accordance with a mandate or investment program and serving as the basis on which a client’s specific portfolio will be managed |
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Portfolio |
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Each individual client account managed in accordance with an investment model. |
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Account |
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Each individual client account managed in accordance with a managed account model |
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Block trade |
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A transaction, generally of listed assets, which is undertaken on behalf of multiple client simultaneously and where their individual entitlement is apportioned at the completion of the trade. |
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Term |
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Definition |
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MDA Provider |
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Responsible for the operation of an MDA service – previously called MDA Operator |
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Responsible Entity |
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Responsible for the operation of a Managed Account when run through an MIS structure |
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External MDA Adviser |
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An AFS Licensee, other than the MDA Provider, providing advice on the suitability of the MDA service and the investment program. They need to be authorised to provide personal advice on all the investment types included in an MDA service. |
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Portfolio Manager |
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The person or organisation responsible for the investment approach, asset allocation and manager selection of the model |
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Investment Manager |
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The person or organisation responsible for individual security selection decisions for all or part of a managed account model |
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Dealer as Manager |
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Where the AFSL responsible for advice acts as Portfolio Manager or Investment Manager. The AFSL may be MDA Provider or Responsible Entity or may be operating under a delegated authority. |
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Rep as Manager |
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Where the Adviser is delegated by the MDA Provider or responsible Entity to act as Portfolio Manager or Investment Manager |
DISCLAIMER: The information in this document is not legal advice and does not take into account the investment objectives, financial situation and particular needs of investors. It is intended for advisers and professional investors only. Where a term is defined under law or regulation the meaning or application of that term should be checked against the relevant instrument.