Australia Managed Account Advisory Models, Revenue Structures and Compliance Obligations

The advisory model a practice operates under, adviser directed, discretionary investment management or hybrid advisory, determines both how it can charge for managed account services within the Australia managed accounts market and which compliance obligations its responsible manager must satisfy, since these two dimensions are set by the same underlying regulatory authorisation rather than negotiated independently.

This coupling means a practice cannot simply choose the revenue model it prefers and work backward to a compliance approach; the authorisation it holds effectively fixes both dimensions at once, which is why advisory model is usually the first decision a newly self-licensed practice must make before it can finalise its managed account pricing.

The interdependence between charging and obligation is not always obvious to a practice weighing its options for the first time, since the commercial pitch for discretionary authority typically emphasises the revenue flexibility it unlocks without equally emphasising the compliance investment that same authority requires as a precondition.

Newer entrants to self-licensing frequently underestimate this coupling during their initial business planning, budgeting for the revenue upside of discretionary authority without fully costing the compliance infrastructure that authority requires, a mismatch that has led some practices to revert to adviser-directed operation after an initial attempt at full discretionary authority proved more resource-intensive than anticipated.

Adviser Directed, Discretionary and Hybrid Advisory Models

Adviser directed models require the adviser to obtain client consent for each material portfolio change, the lowest-authorisation approach and the one most smaller and newly self-licensed practices operate under before building out fuller discretionary capability. Discretionary investment management removes that per-transaction consent requirement, letting the adviser or manager trade within the mandate's parameters, an approach that requires the managed discretionary account structures covered elsewhere in this report and the specific authorisation that comes with them.

Hybrid advisory models blend the two, applying discretionary authority to routine rebalancing and model implementation while retaining client consent requirements for larger strategic asset allocation shifts, a structure some licensees favour as a middle ground between administrative efficiency and client engagement.

The choice among these three is rarely permanent: many practices begin adviser directed while building their compliance capability, then progress to hybrid or fully discretionary authority once their responsible manager function and documentation processes can support the higher obligation load discretionary authority carries.

Client perception of these three models also differs meaningfully: an adviser-directed relationship keeps the client actively involved in each decision, which some clients value as engagement and others experience as an administrative burden they would rather delegate entirely, a preference difference that shapes which advisory model a practice ultimately builds its client proposition around.

A licensee's decision about which advisory models to permit its affiliated advisers to operate under is itself a significant strategic choice, since offering discretionary authority across a licensee network requires central compliance infrastructure capable of monitoring mandate adherence across every discretionary account the network runs, a cost that only makes sense once the network reaches sufficient scale.

Documentation practices differ correspondingly across the three models, with discretionary arrangements requiring the most extensive upfront mandate documentation and adviser-directed arrangements instead generating more frequent, smaller consent records tied to each individual transaction.

Administration, Portfolio Management and Platform Fee Layers

Managed account pricing typically separates into three fee layers: an administration fee covering custody, reporting and platform infrastructure, a portfolio management fee covering the investment strategy and rebalancing service, and in some structures a separate platform access fee layered on top of both.

How these layers are bundled or unbundled varies materially by provider, with some national platforms presenting a single all-in fee to the end client while independent managed account specialists more often itemise each layer separately, a distinction that affects how easily a client or adviser can compare total cost across competing providers.

This lack of pricing standardisation across the industry is itself a source of friction for advisers comparing providers, since an all-in fee from one provider and a three-layer itemised fee from another are not directly comparable without normalising both to the same total-cost basis.

Advisers comparing providers on price alone without normalising for bundling risk drawing the wrong conclusion about which arrangement is genuinely cheaper for a given client, since a headline administration fee that looks low may simply be shifting cost into a separately charged portfolio management layer that is easy to overlook during initial comparison.

Total cost of ownership analysis, comparing the full stack of administration, portfolio management, platform access and adviser charging fees against the ongoing time saving a managed account structure delivers, has become a standard part of how sophisticated practices now evaluate a prospective platform relationship, rather than comparing headline administration fees alone.

Some providers have begun publishing standardised total-cost calculators specifically to address this comparability problem, letting a practice enter a hypothetical client balance and see an estimated all-in cost across the full fee stack regardless of how that particular provider structures its own internal fee layers, a development that has made genuine cross-provider comparison meaningfully easier than it was in earlier years of the market.

Adviser Charging and Performance-Based Arrangements

Adviser charging sits as a distinct layer again, separate from the platform and portfolio management fees, typically structured as an ongoing percentage-of-assets fee for advice services rather than bundled into the managed account pricing itself, since the advice relationship and the investment management service are regulated and disclosed separately. Performance-based arrangements remain uncommon in the retail segment but appear more frequently in bespoke mandates for private wealth firms and dealer groups serving high-net-worth and family office clients, where a client may negotiate a fee structure tied to outcomes rather than a flat asset-based charge.

The separation between adviser charging and investment management fees exists partly for disclosure clarity, since a client needs to see clearly what they pay for advice versus what they pay for the underlying investment service, and combining the two into a single number would obscure that distinction from a regulatory disclosure perspective.

Disclosure documents for managed account arrangements typically itemise the adviser charging component separately from the investment management and platform fees precisely so a client can compare the cost of advice against the cost of implementation, an important distinction in a market where bundled all-in pricing from some providers could otherwise obscure how much of the total cost is genuinely attributable to the advice relationship itself.

Where a performance-based arrangement is used, it typically applies only to the investment management component and sits alongside, rather than instead of, a base administration fee, since providers generally remain unwilling to make the core platform and custody service itself contingent on investment outcomes.

Authorisation and Responsible Manager Obligations

Running a managed discretionary account structure requires the licensee's responsible manager to hold specific MDA authorisation on the Australian Financial Services Licence, a higher bar than the authorisation needed to operate purely adviser-directed arrangements.

Ongoing compliance reporting obligations follow the same pattern: discretionary authority carries more extensive documentation, client agreement and periodic review requirements than an adviser-directed model, since the regulatory framework treats delegated discretion as carrying materially higher client protection stakes.

Licensees that hold discretionary authorisation typically maintain a dedicated compliance function specifically to monitor mandate adherence across all discretionary accounts, a resourcing commitment that is part of why smaller practices often delay pursuing discretionary authorisation until their managed account book reaches sufficient scale to justify the ongoing compliance overhead.

The scale of compliance investment required to support discretionary authorisation has become a genuine competitive differentiator among licensees, since a licensee with a mature, well-resourced compliance function can support a much larger book of discretionary managed accounts than one still building out that capability, directly shaping how quickly a growing practice can expand its managed account offer.

Regulatory attention to managed discretionary account conduct has increased in recent years, reinforcing the practical importance of the authorisation and documentation obligations described above rather than treating them as a purely administrative formality separate from how a practice actually operates day to day.

A responsible manager's obligations extend beyond initial authorisation into ongoing supervision, including periodic sampling of discretionary trading decisions against documented mandates and maintaining audit-ready records that a regulator could review at any time, obligations that persist for as long as the licensee continues operating under discretionary authority rather than being satisfied once at the point of initial licensing.

This obligation load is a genuine barrier to entry for smaller licensees considering discretionary authority, reinforcing why most discretionary managed account activity remains concentrated among larger, more established licensee groups.