IMAs have the edge in managed accounts


By Julie May

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Recent market commentary on managed discretionary accounts (MDAs) and separately managed accounts (SMAs) was misguided and too often left out the role individually managed accounts (IMA) played in the market, Implemented Portfolios managing director Santi Burridge said on Friday.

He told financialobserver that MDAs were a regulated service offering, not a product.

“MDAs are not a way of life. The real debate needs to be around SMAs versus IMAs,” he said.

He described an SMA as a transparent managed fund and a product more recently white-labelled by licensees attempting to create another means of deriving margin share.

“An SMA is not a service. It does not help advisers run a better business and if anything, it puts advisers in the very awkward position of having to defend fund managers’ decisions while having no control over them,” he said.

“I ran an SMA business for two years in the mid-2000s and I know from first-hand experience how dangerous they can be in shifting the client conversation from their goals to why did the manager buy that stock or sell that one, which is exactly where you don’t want the conversation.”

Burridge said it was why Implemented Portfolios invested several years in developing its IMA service.

“An IMA is a service where the adviser and client have full control,” he said, adding portfolios could be tailored and adjusted to meet individual circumstances.

Burridge said advisers and clients could choose how fast they implemented a strategy, could decide whether to exclude certain assets or never to sell certain stocks or parcels of stocks.

“At the core of an IMA is the ability to customise mass individual client portfolios,” he said.

“In the case of Implemented Portfolios, that is us remodelling 1000 accounts and knowing the adviser and client’s individual preferences around tax, implementation, remodelling and asset preferences.

“We create one trade, execute it and communicate to clients exactly what happened and why.”

Burridge said he wanted the industry to be clear that MDAs were a licence, SMAs were for the most part a transparent managed fund, while IMAs were a service to advisers and their clients.

Meanwhile, Tria Investment Partners also addressed managed accounts in a blog published last week.

It said IMAs were bespoke for each client and therefore required intensive effort from portfolio managers, whereas investors in a particular SMA started with the same investment strategy.

“MDAs are a completely different beast altogether, but the term is often misused,” the group said.

“MDAs are not a product at all, rather an advice arrangement where the adviser is given permission to make investment decisions, within certain parameters, without seeking the client’s approval,” Tria said, adding that ASIC had not surprisingly taken a dim view of MDAs in recent times.

Tria partner Oliver Hesketh said advisers had been well ahead of platforms in relation to managed accounts, and although there was a clear demand for proper, full-functioning solutions, it had taken a while for the platforms to develop and deliver capabilities.

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