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Managed Discretionary Accounts

A managed discretionary account (MDA) is a facility – other than a registered managed investment scheme (registered scheme) or an interest in a registered scheme – in which an MDA client entrusts management of their portfolio of assets to an MDA provider.

Pursuant to ASIC Instrument (Managed Discretionary Account Services) Instrument 2016/968 an:

MDA provider means a person who holds an Australian financial services licence that authorises:

(a) dealing by way of issue in either or both of:

(i) interests in managed investment schemes that are limited to a right to receive MDA services; and

     (ii) miscellaneous financial investment products that are limited to a right to receive MDA services; and

(b) dealing in all the financial products that may be acquired with client portfolio assets under the MDA contract; and

(c) except where an external MDA adviser has contracted directly with each retail client to whom the MDA provider provides MDA services to provide financial product advice relating to the ASIC Corporations (Managed Discretionary Account Services) Instrument 2016/968 Part 1—Preliminary investment program—providing personal advice to people as retail clients in relation to the MDA; and

(d) except where an external MDA custodian has contracted directly with each retail client to whom the MDA provider provides MDA services to hold each client portfolio asset that is a financial product or a beneficial interest in a financial product—providing custodial or depository services, in relation to those client portfolio assets.

Managed Discretionary Accounts are essentially a portfolio management service in which investors provide funds to an investment manager to manage your portfolio in line with an agreed Investment Program and the client retains beneficial ownership of the assets.

By setting up a Managed Discretionary Account, you are able to remove the constant back and forward between you and the manager when it comes to the buying, selling or applying for investment in a wide range of investment products. So essentially, you are giving your money – or some of it – to someone else to look after.

The key benefits of a Managed Discretionary Account are that you are gaining access to a professional investment manager with extensive access to research and expert stock selection, which ultimately includes their active management of your account on a daily basis, responding proactively to market changes.

In addition, your Managed Discretionary Account can have a high degree of flexibility and tailoring to your specific investment strategy and or needs, including your risk tolerance rather than your money being merely thrown into a fund along with all the other investors pooled money.

In this way, Managed Discretionary Accounts are different from managed funds and provide greater transparency – through portals and individual correspondence - as to what the investors’ money is doing and when.

Who regulates Managed Discretionary Accounts?

With the spotlight placed firmly upon the financial services industry in the wake of the 2018 Royal Commission into the misconduct in banking, superannuation and the financial services industry, there is little doubt that investors are more aware of the need for accountability and transparency in their dealings with advisors in the sector.

Managed by ASIC under the Regulatory Guide 179: Managed Discretionary Accounts, there are strict rules and regulations that govern the setting up and running of these accounts for retail clients.

Therefore, providers of MDA Services must hold an Australian Financial Services (AFS) Licence with specific authorisations which allow them to issue MDA Services to clients. As a result of holding an AFS Licence they are governed by ASIC under the Corporations Act 2001.

Under an MDA Service you will receive personal advice from your financial adviser, who must hold the professional qualifications (or will be working towards holding the professional qualifications during the transitional period) as prescribed by The Financial Adviser Standards and Ethics Authority (FASEA) and meet, at all times whilst dealing with you, the principles and core values set under the Financial Planners and Adviser Code of Ethics.

Why use a Managed Discretionary Account?

The underlying benefit of Managed Discretionary Accounts is flexibility and transparency.

According to financial adviser and co-founder of Plenary Wealth Julian Nowland, “Using managed accounts has allowed us to switch the client communication on investments from being an admin and paperwork focus into a marketing and education strategy”.

Nowland continues, “instead of requesting information from clients to fill out forms or getting permission to buy this and sell that, we can focus on education, keeping clients updated on changes being made to the MDA, why it has happened and how that relates back to client’s lifestyle outcomes.”

By reducing the amount of paperwork and the authority to execute buys, sells and applications for financial instruments within the agreed guidelines, managers are provided with far more flexibility to act and capitalise upon opportunities as they arise – often in a time-critical manner.

If the account was ‘non-discretionary’, the advisor would require a range of authority from the client and paperwork to be completed by the client to transact the trade. This also assumes that the client was available at any given moment to speak with the advisor.

As such, Managed Discretionary Accounts are ideal for people who are busy or people that don’t have the time or skills to be involved in the ‘active portfolio management’, but rather prefer a balanced approach to their investment strategy having a long-term view.

In addition, should the client be travelling or on a different time zone, Managed Discretionary Accounts can provide solutions, which allows them to be essentially passive to their portfolio management, while their advisor makes their money work for them.

With usually a minimum $250,000 minimum investment requirement, they are suited to the sophisticated investor and those who meet the investment requirement.

What to look out for in a Managed Discretionary Account Manager?

When looking to invest money into a Managed Discretionary Account, there is a range of elements that you should always look for when assessing the viability of a manager for your account. Firstly, you want a manager who has knowledge around not just securities, but also a wide range of derivatives, managed investments, foreign exchange, margin lending and alternative investment strategies.

Having a Managed Discretionary Account manager who is well versed in a wide variety of investment options will provide you with the most holistic portfolio options and opportunities, which is always a benefit for any portfolio. In addition to this, ensure that your chosen financial advisor is on the Moneysmart Financial Advisors register and that they hold (or are working towards holding) the professional qualifications prescribed by FASEA.

Why are Managed Discretionary Accounts growing in popularity?

Like many industries, the financial services industry is being held to account for often out-dated practices due to technology driving innovation in the sector. As such, this technology is seen not only to increase efficiencies but also in transparency and accountability.

Growth in Managed Discretionary Accounts has been driven by several factors, including:

  • An attempt to achieve greater practice efficiency among advisers
  • A desire by advisers to deliver better, more precise client outcomes
  • Technology developments that have enabled the systematic, model-based management of many portfolios
  • A strategic trend for advice businesses to move towards wealth management, with different pricing models

Through Managed Discretionary Accounts, investors are able to be more connected to their investments thanks to technology and have more visibility and accountability, while the account managers have the authority and flexibility to act as the opportunities arise to maximise the growth potential of the portfolio.

Unlike many funds, in a Managed Discretionary Account, the investments and cash are all held in your name, on your HIN rather than on the managers or the fund itself. As the owner of the Managed Discretionary Account, you can always log in to review the exact composition and value of the portfolio at any time through online platforms, providing the ultimate in transparency.

In addition, Managed Discretionary Accounts are far simpler to manage come tax time, as all the investments are held by you, without other people moving in and out of the fund, potentially impacting your capital gains tax each financial year.

However, as with any financial service or investment, there are risks that need to be assessed and managed in line with your personal investment strategy, risk tolerance and desired outcomes.

The size, make-up and strategy you employ in your Managed Discretionary Accounts, like all investments, will be subject to market volatility, company, sector and industry risks. When dealing with overseas markets or currency, it should always be assumed that foreign exchange risks would apply and have a bearing on the gains/losses.

When using leveraged products, such as CFDs (contracts for difference) or leveraged loans or positions to amplify the position that the Managed Discretionary Account manager may employ or wish to hold, it should be noted that your position may require additional capital that exceeds the amount available in the fund, should the investment go against your position. Participation in leveraged products should be the part of your investment strategy which is taken with caution.

With all of the potential benefits that Managed Discretionary Accounts offer to investors, there are risks, but like any good hedge, they can be managed with due diligence and ensuring that your account manager is suitability qualified and experienced to meet the needs of your investment goals.

Related blog articles

How to start out in alternative investments?

Aug 20, 2021 11:09:17 AM

How to start out in alternative investments?

Like many investors out there, you have decided to ‘start out in alternative investments’. You understand your risk tolerance and you have your objectives in place – if not, you obviously didn’t read the last section, please do!

Now it's time to work through how to get started. As we have mentioned more than a dozen times in this book, it is vital that you get advice first. Speaking to an expert in alternative investments is key to your success, when starting out in the world of alternative investments.

You may think that investing in a managed fund is the best path for you, or maybe a piece of artwork. But which fund? Which piece of artwork? Why?

This is where the experts come into action. They can provide you with factual data on the performance of their funds, of their investments, of what your money ‘could have looked like’ had you invested with them 1, 3, 5, 10 years ago. Often this is very compelling, but always remember, that past performance is not an accurate predictor of future returns!

It must be noted though, that in the wake of the Royal Commission into the Financial Services Sector, new laws require a financial adviser to recommend an investment strategy that best suits the client so the expert should be able to speak about more than just their own strategy or an MDA, but a range of financial products to best identify what will suit your particular needs.

As an investor that is new to alternative investments, it is often easy to get caught up in how well funds have performed, but you need to ask why? What market conditions lead to this?

Although you might feel like a ‘dummy’ before you put your hard-earned money into a fund, you need to understand everything about how it works, you have every right to ask why, what, when, where and how as many times as you need until you feel comfortable.

Should you be investing in a fund or a scheme, there will always be a prospectus or information memorandum for you to review. Take it to your financial planner and/or accountant and ask them to review it, again ask as many questions as you can.

The key is not being caught up in all the ‘smoke and mirrors’ that sometimes-unscrupulous fund operators have. For example, from a sleepy little town in Northern New South Wales, Kingscliff came Gold Sky, voted the #1 fund in a prestigious Hong Kong awards for fund innovations.

The fund claimed to use ‘big data’, ‘social media’ and ‘quantitative analysis’ to deliver returns well beyond market averages. Backed by big named sports stars, and holding lavish events with industries heavyweights such as Mark Bouris guest speaking, everything looked like gold for this little fund.

Then, it all came crashing down as the SEC and ASIC started peeling back the layers of the onion, looking into the director, his fund’s management experience and of course the company balance sheet and realised it was nothing but a Ponzi scheme, leaving investors over $12 million out of pocket.

By definition, the “key elements of Ponzi scheme are as follows: (1) using new investor funds to pay prior investors; (2) representing that the investor returns are generated from a purported business venture; and (3) employing artificial devices to disguise the lack of economic substance or defer the recognition of economic loss”.

In short, where money is involved, unfortunately, there are in many cases a large number of unscrupulous operators, doing a lot of things that are not only bad business but also illegal.

Before you step into investing, be sure to get independent advice from more than one person including your accountant, your financial advisor, and your lawyer. But if you don’t have any of those, maybe consider looking into getting one, as you want to make sure you are always protected.

What type of investor are you?

Aug 20, 2021 9:28:03 AM

What type of investor are you?

Now, having reviewed the multitude of investment opportunities, both in traditional and alternative investments, you should have a grasp of what each investment avenue can provide and where you potentially fit in.

Odds are, as this is a beginner’s guide, then you will be starting your journey into investing. If, however, you are reading this section of this e-book, then you have started your journey in the right way. Getting information and a basic understanding of the different types of investments - both alternative and traditional – is paramount before you start anything.

Once you have finished this book, sign up and attend a few seminars, take a workshop or two, even log in and start trading on a simulator – such as the ASX Game – which allows you to trade in live conditions, but with money that is not your own. Therefore you limit any losses entirely, but unfortunately, you don’t make any gains.

So, now to the million-dollar question, what type of investor are you? The key is to understand first what your objectives are? Are you looking for the thrill of trade, buying and selling quickly and taking risks, or are you looking to invest for the long term, maybe to support or fund your retirement?

Like you would a business plan, firstly, set yourself a series of key goals or objectives. These can include setting up a residual income stream in 5-10 years or turning $10,000 into $100,000 in ten years. Ensure you are being SMART or, Specific, Measurable, Achievable, Relevant and Timely.

For example, by 2025, I want to have a diversified portfolio of shares with a value of $60,000. So, even if you have to put in $12,000 per year, or $1,000 per month into your portfolio and you make no capital gains through the shares, this is achievable.

Once you have 5+ objectives in place, now it is time to understand your risk tolerance. Can you afford to lose everything you are putting in? If the answer is no, then shares, cash and property through the ‘traditional’ investment channels are right for you. Potentially being part of a managed fund, even investing in some art could be of benefit.

On the other hand, if you have come into some money – through inheritance or otherwise – maybe you own your own home, and you are looking to invest money and make a higher return – with little to no consequence to your livelihood or the roof over your head, then potentially looking at investing in a fund, ETFs or even CFDs could be an option.

We will always put a warning in place, that these alternative investment channels are used by experts, as when people with a little knowledge play in this space, they are often taken advantage of and can lose a lot more than you thought you were investing – as mentioned above.

So, the key is to get advice, seek experts to guide you. For example, many MDAs – such as the MDAs at Walker Capital – provide minimum investments of $10,000, and their returns – which you can see for yourself on our website – often buck the trends in the marketplace. It must be noted that the investment strategy used by Walker Capital as part of the MDA includes investing in highly risky and speculative products.

While investing is often seen as a long term strategy to future wealth and sustaining your lifestyle, there is no question that when you put your own money in, you become very interested in reading about company information, market movements and looking for the next play for your portfolio. Stay informed, read the financial papers, websites and blogs from ‘real’ authority figures – and NEVER invest more than you can afford to lose.

So, you could be a risk-averse investor, putting your money only into ‘blue-chip stocks’ such as BHP and the banks, while ensuring that you have your mortgage paid and your kids school fees paid. On the other side of the coin, you may have a high-risk tolerance, happy to risk $1,000, $10,000, $100,000 even $1,000,000 if the payoff is worth it.

The key is to set your objectives, set your limits, get expert advice and stick to your line – the moment you start deviating, getting carried away or ‘straying from your strategy’ this is where mistakes can be made and losses incurred.

Other Investments

Aug 20, 2021 9:25:54 AM

Other Investments


Investing in art has moved from the stuffy collections of the wealthy elite, into the mainstream as investors around the world seek to diversify their portfolios, hedge against risk and collect some beautiful talking pieces for their office or home walls along the way.

In 2019 the Art Basel UBS Art Market Report contended that the global art market was worth close to $US67 billion. Now to many investors, this may seem like something too good to miss out on, however, although the market value increased vs. 2018, the net gain over 10 years is 8.7 per cent, which is lower than the Australian rate of inflation! 

With over 40 million transactions in the global art market, there is an underlying assumption of ‘liquidity’ in the market, as could be assumed with the trading of shares, bonds or other financial instruments. However, this is not the case for all art, the market certainly is a ‘buyer beware’ scenario.

Like with other financial instruments, without prior experience or knowledge an investor wouldn’t simply walk in and buy any art piece off the shelf – unless they had the means to do so and like the work.

There are indeed intermediaries, galleries, and buyers’ agents providing services from simply the buying and selling of the works, through to providing services such as ‘buyers agents’ as you would find in real estate, who scout out particular works or artists. In addition, there are art investment specialists that work directly with clients to purchase high growth prospect works from rising or established artists.

It is often said that beauty is in the eye of the beholder, and no industry is this more apparent than the art world. What some people may see as an eyesore, could fetch astronomical prices at auction; it is simply about investing in the right works at the right time, and like any asset class, knowing the right time to move them.

Transparency and markets are often an issue with art

It is no secret that there are forgeries and many cowboys trading art around the world, and not merely in a Jack Ryan or James Bond thriller. Artworks, especially those considered ‘fine art’ can be sold for millions, tens of millions, even hundreds of millions of dollars, so it is no wonder there are forgeries and fakes circulating out in the marketplace.

The art market as a whole is largely unregulated, leading to a wide range of issues in itself. In addition, the trade in fine art is unpredictable because it depends not just on supply and demand but also on the unmeasurable factor of taste.

Although this is starting to evolve and change, with many art registers and auction houses around the world implementing blockchain technology for the purpose of cataloguing and tracking the movement of art from galleries, through to storage to stamp out forgery.

Like all investments, for those who are entering the market for the first time, or potentially looking to step their investment up a level, seeking expert, certified & professional advice is always the best course of action. As previously mentioned, there is a wide range of experts around the world that specialise in particular art types or even investment art pieces.

These are pieces that are in high demand by private and corporate houses, that seek to lease the asset, providing ongoing and incremental returns, while the owner also enjoys the asset value appreciation. Through the right investment strategy, there are significant opportunities and ROI that can be realised, not only for a capital gain but also for portfolio hedging.


Like art, antiquities have grown significantly in appeal for portfolio diversification in the past few decades. However, before such time, antiquities have been the source of much conflicts, such as the crusades in which the knight’s templar plundered much of the middle east in the quest for the holy grail, said to be the cup that Christ passed around at the last supper.

All that aside, antiquities have a large potential capital appreciation, and many of us don’t even know what we may have in the cupboard. From dinner sets, glassware, pottery, vases, furniture that has been created by famous artists, or production houses – such as Royal Doulton – have huge potential for capital growth.


If you were lucky enough to get your hands on a bottle of 1951 Penfolds Grange Hermitage from your grandparent’s cellar from back in the day, you would be doing ok. Individual bottles of the 1951 vintage are still held by collectors; one sold at auction in 2004 for just over $50,000.

The global wine industry was valued at approximately USD 302.02 billion in 2017 and is expected to generate revenue of around USD, 423.59 billion by the end of 2023, growing at a CAGR of around 5.8% between 2017 and 2023.

Investment in wine most certainly is not a new idea, however with high levels of transparency, accountability and liquidity – unlike say cryptocurrencies – there are huge opportunities to be made at all levels of the spectrum. It should be remembered that we are not suggesting you head down and get a case of 2019 cleanskins from your local bottle shop as an investment.

The fact of the matter is “less than 1% of all wine produced worldwide may be considered investment grade, with the market traditionally preoccupied with the prestigious chateaux of Bordeaux. The finite quantities produced, ever-decreasing through consumption generally ensure predictable growth in the long-term with a perfectly inverse supply curve”.

But in saying that, as new and emerging markets – such as the Chinese & South East Asian middle-class rise in numbers and appreciation of wines, the markets are certainly being challenged in terms of their supply/demand curve.

Like investing in stocks, art or maybe a fund, it is important to not just go it alone. Also remembering that just because you may like a particular wine, it doesn’t make it valuable. There are many wine shows around the capital cities and wine regions of Australia, as well as auction houses – such as Langton’s in Melbourne and Christie's Auction House in Sydney – that run specific wine investment courses, auctions and of course events.

Not only could you make a good investment by attending such a course, but also you will learn a lot and have a great time while doing it.

Other alternative investments

These include Private Equity Infrastructure, Private Equity Real Estate and Private Equity Debt Funds; these are very selectively used and are most certainly not available to any investor off the street.

The investments outlined are highly complex financial instruments that are used by only ‘institutional investors and extremely wealthy individuals.

That being said, it is still very important as you move through your investment journey, especially that into alternative investment opportunities, to understand them – if even from a basic level. As such, we have provided a brief synopsis of each to give you an understanding.

Private Equity Infrastructure

Investing in Private Equity (PE) infrastructure is an investment in utilities, transport, social infrastructure: such as hospitals and schools and of course energy assets. Unlike ‘private equity’, PE Infrastructure is treated differently due to its low volatility and strong cash yield. In addition, infrastructure assets performance is often implicitly or explicitly linked to macro indicators such as inflation, GDP, population growth, and has a very low correlation with other asset classes.

So, why can’t I jump on this asset I hear you say? Well, often the buy-in for such an investment is in the Millions, even hundreds of. Not only that, but they are highly complex in their structure and done through the big end of town. So although it would be great to put your $10,000 savings into, unfortunately, this is not for you.

Private Equity Real Estate

Typically for private equity real estate, the minimum rate of investment is often starting from $250,000. This is often a barrier to many investors.

Private equity real estate is an asset class composed of pooled private and public investments in the property markets. Investing in this asset class involves the acquisition, financing, and ownership (either direct or indirect) of property or properties via a pooled vehicle.

Although very risky – due to the fluctuations in property prices, supply, demand and other both micro & macro-economic factors – the return on investment is not uncommon to realise 8%, 10% even 20% depending on the countries and regions you are investing in, and the types of real estate assets – i.e. hotel, commercial, mixed-use and residential developments.

Private Equity Debt Funds

Created, raised and managed by professional investment firms and managers, a private equity debt fund is used for making investments in various ‘debt’ securities according to one of the investment strategies associated with private equity. At inception, institutional investors make an unfunded commitment to the limited partnership, which is then drawn over the term of the fund.

Similar to other funds, there are passive and active funds, depending on their level of management, however, as a general rule, they offer less attractive returns for investors. “A debt fund may invest in short-term or long-term bonds, securitised products, money market instruments or floating rate debt. On average, the fee ratios on debt funds are lower than those attached to equity funds because the overall management costs are lower”.