Separately Managed Accounts (SMAs): A Standardised Approach to Fee Transparency

In the ever-evolving landscape of financial services, Separately Managed Accounts (SMAs) have emerged as a preferred investment vehicle for investors seeking professionally managed, diversified portfolios. However, until recently, the lack of standardisation in fee reporting across different platforms and Responsible Entities (REs) created confusion among advisers and investors alike. The introduction of the SMA Reporting Standard aims to bring much-needed clarity and consistency to the industry.

What Are Separately Managed Accounts (SMAs)?

SMAs are professionally managed portfolios consisting of various asset classes, including equities, fixed income, and other investment vehicles. Unlike managed funds, where investors pool their assets, SMAs allow individual ownership of securities while benefiting from professional investment management.

The Need for Standardisation in SMA Fee Reporting

Before implementing a unified reporting standard, comparing SMAs across different platforms was challenging due to inconsistencies in fee structures. Investors often found themselves questioning why seemingly identical SMAs had varying costs, making informed decision-making difficult.

To address this, the SMA Reporting Standard has been introduced to ensure:

• Transparency in fee reporting

• Consistency across platforms and REs

• Simplified comparison of SMAs for investors and advisers

  
  

Key Components of SMA Reporting Standard

The SMA Reporting Standard outlines specific fields that must be included in fee disclosures, ensuring a comprehensive and consistent approach. The mandatory fields include:

1. Standard SMA Reporting Fields

Each SMA must be reported with the following fields:

• Name & Code: Unique identification for easy reference.

• Platform Group Available: Specifies the investment platform family.

• Underlying Investment Fees: Covers management fees, performance fees, transaction costs, and applicable discounts.

• Portfolio Fee: Encompasses the SMA Manager Fee and Responsible Entity Fee.

• SMA Transaction Costs: Captures trading costs incurred due to rebalancing.

• Asset Allocation Type & Asset Allocation: Defines the investment strategy and proportion of different asset classes.

  
  

2. Transparent Fee Disclosure

One of the critical aspects of the standard is ensuring that fee disclosures align with ASIC’s Regulatory Guide 97 (RG97). This guide mandates a uniform method for calculating and disclosing management fees, performance fees, and transaction costs.

The inclusion of an Underlying Investment Fee - Fee Discount field ensures that fee rebates and discounts granted by investment managers are correctly reflected, preventing misleading cost disclosures.

Implications for Advisers and Investors

For financial advisers, the standardised approach simplifies the process of comparing SMAs, allowing them to recommend solutions best suited to their clients' needs. Investors benefit from increased transparency, enabling them to make more informed investment choices.

Planwise Services specialises in assisting financial advisers with SMA compliance and reporting, ensuring adherence to the latest industry standards.

For more details on SMA reporting standards, visit www.smastandard.com.au.