Managed accounts: Product or service? Conflicted or not?

Mike Taylor

Managing Editor and Publisher

15 February 2022

The question of whether managed accounts are a product or a service appears to sit at the heart of a disagreement between the chair of the Institute of Managed Account Professionals (IMAP), Toby Potter and the chief executive of CountPlus, Matthew Rowe.

Reacting to comments by Rowe that some Managed Discretionary Account (MDA) operators may be conflicted because of vertically-integrated structures or the taking of a fee, Potter is arguing this misunderstands the real benefits for clients delivered by well-designed and executed managed accounts programs. https://financialnewswire.com.au/funds-management/in-defence-of-efficiency-case-for-managed-accounts

Potter’s views are contained in a column published on Financial Newswire here:

Responding to Potter’s claims, Rowe said he did not resile from his view of managed accounts and, while accepting that they delivered efficiencies, he pointed to the conflicts inherent in some of the structures and advisers taking a fee.

He said that where a licensee or advice firm took a per centage of the funds under advice clip on a managed account, a question needed to be asked about what value they were adding for the client.

“For instance, does that licensee or firm have the appropriate skills and experience to act as a professional investment manager? In some instances ‘yes’, but in many instances ‘no’,” Rowe said. “We prefer a model where a professional Investment Consulting or Investment Management firm be appointed under these managed account arrangements and be paid accordingly for their expertise.”

However, Potter argues that fees taken by advisers with respect to managed accounts are likely to be more compliant with the Financial Adviser Standards and Ethics Authority (FASEA) code of ethics because of the speed with which portfolio changes can be executed, therefore complying with the need to act “efficiently” and “fairly”.

The disagreement comes amid arguments that managed discretionary accounts are a services rather than a product, and with the Australian Securities and Investments Commission having stated that an MDA is both a managed investment scheme (MIS) and a facility for making a financial investment.