Stockspot finalises structure for ETF models

18-Nov-2013

By Krystine Lumanta

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Online exchanged-traded fund (ETF) portfolio manager Stockspot will use a managed discretionary account (MDA)-type structure for its ETF model portfolios.

Stockspot founder Chris Brycki said compared to making model portfolios available on investment platforms, the MDA would allow flexibility and, therefore, transparency.

“By doing it through a MDA, it will mean clients will always own the assets, which has a big benefit if they decide to move on in the future without having to realise capital gains tax,” Brycki told financialobserver.

“The flexibility was one of the driving reasons why we chose an MDA-style management and I think we can use that structure in a much better way for consumers.”

Stockspot will officially launch its five ETF model portfolios early next year, as it continues to focus on final paperwork and use pilot customers for testing.

As platforms involved a custodian, ownership was not on an individual level, Brycki said.

“I wanted the assets to be held in the names of our clients and there aren’t too many structures that are flexible enough to allow for that in Australia, apart from MDAs,” he said.

“Traditionally, MDAs have been used by advisers to trade and used more as an active product.

“We’ll possibly be one of the first groups to use that structure for a longer-term, slower asset allocation model.”

He said the structure also removed some of the scepticism and apprehension, as it was generally a big decision to go with an investment manager or a platform, and also would end up being a better proposition for advisers.

Furthermore, he said the decision to use an MDA structure was because some ETF model portfolios were only accessible through a platform.

“The problem is even though they say it’s low-cost ETFs, once it’s on a platform there are adviser fees to get you onto the platform and all the platform fees add up,” he said.

“With platforms in Australia, the execution costs are still expensive.”

Stockspot’s ETF model portfolios will charge an annual fee, which includes administration.

“There won’t be any entry, exit or execution fees, compared to separately managed account platforms where you definitely pay execution fees to trade,” Brycki said.

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