Traditionally, Financial Advisers would manage their clients’ investment portfolios by making a few changes at review times, once or twice a year. As the review periods varied on a per-client basis, this meant that all clients under an advisory at any given time would hold different investments with different weightings, even if their risk profiles were the same. For labelling purposes, I will call such portfolios Individually Managed Accounts (IMAs).
To add efficiencies, Advisers started utilising model portfolios to manage and track changes, and add an element of governance and Approved Product List control (APL). Advisers subscribing to such a model realised the benefits of transacting their model portfolios live using discretionary trading rather than once or twice a year at client review periods. A floating rebalancing policy could effectively make it so all clients held the same positions with the same weights at any given time under the same risk profile. Even a new client investing in the model portfolio would receive the exact same portfolio as the existing client base holds.
For an active investment manager, the pros outweigh the cons for administration as well as their client’s best interests in most cases. I would like to point out that not all clients benefit from discretionary trading, and some will always prefer more frequent contact with their adviser. For those clients where a model portfolio is suitable, then it can usually be done in two ways under what we term as Managed Accounts.
- Separately Managed Account (SMA) or
- Managed Discretionary Account (MDA)
There are many articles dedicated to the differences and advantages of each, so I won’t go too far into these differences in this article. What I will say is that an SMA at one end of the spectrum offers maximum scale and must have a Responsible Entity (RE) involved, as it is a PDF Product. When an RE is responsible for the Investment Managers’ adherence, it means that there will be limitations on the model portfolio and therefore a lack of flexibility.
MDAs sit at the opposite end, offering much more flexibility at the cost of scalability. As an MDA is really just a contract, then each client can be set up with an IMA versus an SMA, which is a model portfolio. The advantage that MDAs hold is that you can manage both model portfolios and IMAs versus SMAs, where you can only administer models.
Regulated Platforms, or Wraps, first came about predominantly so that advisers could access and offer wholesale managed funds to retail clients. Over the last 25 years, Funds Under Management (FUM) has grown exponentially, as current benefits include access to Superannuation trustees, stock exchanges, foreign markets, and reporting tools. Needless to say, it became important for Platforms to be involved in the growth of Managed Accounts.
The Boutique Advantage: Why MDAs Lead in Client-Centric Management
When flexibility is key, MDAs unlock doors SMAs simply can’t.
While SMAs present a streamlined option for high-scale execution and RE oversight, the trade-off comes at a cost—rigidity. Investment decisions under SMAs must adhere to platform-imposed governance frameworks that can stifle tactical responses, customisation, and true discretionary management.
In contrast, MDAs empower advisers to treat each portfolio like the unique entity it is. With no limitations from an external RE and the ability to operate both IMAs and model portfolios, MDAs allow skilled professionals to adjust weightings, respond to market movements, and implement tailored strategies in real-time. This agility translates to improved client alignment, especially for high-net-worth individuals and those seeking nuanced investment direction.
Compliance doesn’t need to mean compromise.
One of the most persistent myths around MDAs is that they’re harder to regulate. In reality, when structured and monitored properly, MDAs can offer transparent oversight with the added bonus of adviser-led accountability. Platforms have also evolved to integrate robust reporting and audit tools that support the administration of MDAs with precision—mitigating risk while enhancing performance.
Personalisation in a global world.
In an era where investors demand meaningful engagement and bespoke solutions, MDAs offer the boutique experience without sacrificing breadth. Unlike SMAs, which are confined to homogenised model strategies, MDAs allow advisers to build portfolios across asset classes, international markets, and even thematic investing. They can cater to ESG preferences, income focus, tactical tilts, and client-specific constraints—all within the discretionary framework.
Client outcomes first, always.
MDAs allow advisers to be active stewards of their clients’ wealth. Whether managing market volatility or rebalancing opportunistically, the ability to trade immediately and without prior client approval—when in line with an agreed investment program—translates to faster execution and better protection of capital.
While SMAs have their place in institutional-style scalability, for advisers seeking to deliver high-touch, high-impact service with authentic portfolio flexibility, MDAs represent the boutique edge. They’re not just another way to manage money—they’re a smarter way to manage relationships.
If you would like to know more about what you can do to add MDA authorities to your AFS License, then feel free to contact the nice people at Assured Support or MDA Guru. We are here to help.
If you liked this, we recommend that you read:
- SMA or MDA? That is the question.
- “Nobody said it was easy.”: Differentiating MDA, SMA and IMA
- Do You Really Need Discretion?
- Managed Accounts Presentation
Frequently Asked Questions
1. What is the key difference between SMAs and MDAs?
SMAs are standardised, platform-governed model portfolios requiring a Responsible Entity, whereas MDAs offer flexibility and discretion, allowing advisers to tailor portfolios to individual client needs.
2. Can MDAs support both model portfolios and individually managed accounts (IMAs)?
Yes. Unlike SMAs, MDAs can manage both IMAs and model portfolios, offering greater flexibility in tailoring investment strategies to client preferences and market conditions.
3. Are MDAs harder to regulate than SMAs?
Not necessarily. When properly structured and monitored, MDAs can meet compliance obligations through transparent processes, adviser accountability, and platform-integrated reporting.
4. Why might a high-net-worth client prefer an MDA over an SMA?
High-net-worth clients often seek tailored strategies, responsiveness to market changes, and ESG or thematic investing—features more easily achieved under the discretionary framework of an MDA.
5. Do platforms support MDAs effectively?
Yes. Modern platforms offer robust tools for trading, reporting, and oversight, making MDAs a viable and compliant option within an adviser’s broader investment offering.
