SYDNEY November 2013 – The minimum portfolio size to make a Managed Discretionary Account effective is around $200,000, a leading financial adviser says.
‘Arguably you can go as low as the client wants, but typically we would find $200,000 to $250,000 as a minimum portfolio size to make an MDA effective,’ says Crystal Wealth Partners executive director Tim Wedd.
‘Average super balances are probably more like $1 million and high net worth clients are looking at $2 million or more across multiple structures.’
More than 90 per cent of Crystal Wealth’s clients have a self-managed super fund, want an SMSF, or end up in that for their retirement savings. ‘That’s probably no surprise,’ says Wedd, ‘because you’re talking about the older wealth-accumulated generation.’
Often these clients were moving into pension phase and looking at what is the best way to structure investments. ‘They generally want a direct type of investment and they want to see what is going on and they want control of what’s going on and they want to know how much it costs,’ says Wedd.
‘They want to be able to see the transactions, particularly if they’re giving you discretion. They want to be able to see any charges that come out of their accounts and they want to know how it’s being updated.
‘We provide them with daily online information. They have their own user name and password so they can keep an eye on what we’re doing if they want to. A lot don’t but, nevertheless, they feel that they can do that, so that’s one important aspect.’
The MDA structure does not structurally depend on which vehicle is used. Some of Wedd’s clients have a self-managed super fund, a family trust and a personal portfolio. They can all be under the MDA structure, all kept separately, and they are given consolidated views and management, particularly from a tax point of view.
‘That’s one of the key issues,’ says Wedd, ‘because an MDA has individual tax outcomes and managed funds have pooled tax outcomes, and that’s a really important distinction between these two types of managed entities.
‘One gives you everything that happens directly to you, and the other is pooled with everyone else and you get some share effectively of what goes on at the manager level.’
Crystal Wealth Partners is a privately owned boutique financial advisory and investment management firm specialising in delivery of services to high net worth individuals and family offices.
contacts
Tim Wedd
executive director
Crystal Wealth Partners
0408 608 349
tim@crystalwealth.com.au
Christopher Hocking
0418 603 694
chris@chstrategies.com.au
chstrategies.com.au
Twitter: CH_Strategies