Why SMA transparency is necessary and desirable
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12 December 2025
by
Simon Hoyle, Professional Planner
Article link:
https://www.professionalplanner.com.au/2025/12/standardised-sma-reporting-necessary-and-desirable-despite-hurdles/
A standardised reporting framework for separately managed accounts (SMAs) is both necessary and inevitable, the Professional Planner Researcher Forum has heard.
The forum heard that financial advisers currently lack a consistent, reliable source of standardised performance and look-through data for SMAs, often leaving clients with no meaningful performance context for their advisers’ recommendations.
As a result, transparency, comparability and adviser accountability are all weakened, and advisers may be unable to demonstrate they’ve met their best interest duty or to benchmark SMA outcomes against alternatives that might be available.
The forum heard that despite creating a standard will be complex and that it will face significant pushback from some quarters – perhaps most notably fund managers, who continue to believe the composition of portfolios somehow represents “intellectual property” and must not be divulged.
Earlier, ASIC Commissioner Alan Kirkland told the forum that the regulator had broadened an earlier, suspended review of managed discretionary accounts to include SMAs and how advisers use them, in light of the development of the sector, which since 2019 had grown by 24 per cent a year.
As revealed in Professional Planner, ASIC has issued ‘please explain’ notices to licensees and SMA providers seeking information about any sales and revenue targets, inducements and benefits to offer SMAs to retail clients.
“Any time there’s growth in a particular type of product like that, a regulator is likely to be a bit curious in looking at the sector, though we’re going in with an open mind,” Kirkland said during a Q&A session at the forum.
While the regulator was approaching its review with an open mind, it would focus particularly on “conflicts of interest, and on advice that’s provided to establish managed accounts”.
Relationships between the parties involved in setting up managed accounts points to potential conflicts and ASIC wants to know more about what processes are in place to identify, manage and disclose conflicts.
“The different cost and fee structures that come into play with managed accounts put a different perspective on the nature of advice,” Kirkland said.
“In assessing whether advice is appropriate, and in the client’s best interests, how are those costs and fees being considered relative to other investment options available to the client? There are obvious questions for us to be answering, and we’ll be really interested to see what we find.”
Collaboration
But getting to an SMA standard will require collaboration between platforms, consultants, managers and advisers, and before a comprehensive agreed framework emerges the process may begin with something relatively simple, such as consistent fee disclosure. This is the starting point arrived at by Adviser Ratings.
“We’re coming at it from a very simple premise of, let’s just standardise fees,” the firm’s managing director Angus Woods told the Forum.
“We’ve created the SMA standard, spoken to a lot of you in this room, and it’s looking at just fee elements only, initially. When we start to talk about performance, I think that’s where you start to get concerns.
“I’d say mostly from the [fund managers] is where I’m getting more of the pushback, or I understand the pushback is coming from a performance perspective. We stepped back and said let’s not come at it from a performance angle, let’s come at it from a standardised fee angle, and then work with the industry and the participants, the research houses, who can do that themselves.”
In addition to barriers presented by fund managers, platforms are often a significant hurdle to standardised reporting. However, their attitude is being forced to change by market developments and by increased regulatory scrutiny.
“Since Shield and First Guardian, and even since the SMA letter that was released [by ASIC last month], the tone from the platforms has changed,” Woods said.
“They’re very cognisant of the element to standardise, have performance reporting in place [and] that is coming down the track. I would say that resistance… is significantly shifting in the last two, three, four months.”
Mercer Investments head of wealth management investment solutions Rebecca Jacques said the problems faced by advisers in reporting to clients is “problematic”. She said it is difficult to compare SMAs, and what unfortunately is happening is because there is no standardisation, there is a default to an inappropriate type of benchmark”.
Jacques said this is inappropriate “for a multitude of reasons”.
“It’s uninvestible, is probably the first,” she said.
“It doesn’t relate to the underlying asset classes that you’ve built under the portfolio. There’s issues around it, but it’s a widely available benchmark. I wouldn’t say the advisers per se choose it, the REs [responsible entities] and RSEs [registrable superannuation entity] use it as a default, and… we spend an enormous amount of time basically explaining why it doesn’t look and feel like that benchmark.”
Looking to super
In the absence of a widely agreed, standardised approach to reporting, advisers often end up looking to superannuation funds as a form of benchmark.
This might provide “a better element of comparability”, Jacques said, but super funds are not governed by the same liquidity provisions as managed investment schemes “so they can hold a very different asset mix, ultimately, under the hood, which leads to obviously, vast differences in performance”.
NMG Consulting managing director Mark Watmore said it may be simpler to benchmark off-the-self SMAs than tailored SMAs but since “a lot of the growth is in tailored and non-standard or bespoke SMAs” the issue of standardisation is pressing.
“They’re designed specifically to meet the needs of a practice or advice business,” Watmore said. “Therefore just comparing against a default, a standardised default benchmark, does not make sense at all.”
Watmore said the benefits of SMAs for advisers and their practices are relatively clear but it’s not always as obvious that an SMA is necessarily the best thing for the client.
“When we talk to advisers, you say, how do you know if it’s going all right?” Watmore said.
“They say, ‘Well, it’s going up, it seems to be going all right; but I’m getting lots of efficiency benefits’. So they haven’t really got these tools to monitor is it the right thing on an ongoing basis.”
Watmore said that as the SMA market continues to grow and as it matures, the process advisers go through to create or select an SMA will inevitably attract closer attention. The old way of doing things won’t stand up to that scrutiny.
“We’re getting to the point now where [an adviser has] been with a consultant SMA for three or four years, and they say, ‘Well, now I need to go to market and make sure that it continues to be best in class, or suit what my needs are, now I understand this space more’. We’re going to be having proper tenders.”
Until now advisers have selected an SMA by speaking to a platform or a fund manager’s business development manager, who might recommend talking to an asset consultant, “and then we got them in for a dog-and-pony show, and then we chose someone”.
But when there’s as much as $300 million or $400 million being moved around at a time, “there’s going to be a much more commercial and professional level of tenders run”, Watmore said.
“As this area is maturing, [standardisation] is going to be absolutely essential.”
Battle
Count head of investments Simon Jeffery-Bilich said the licensee works closely with its advisers to help them identify their own investment philosophies and to deliver the best solutions to clients, but it’s an issue that “a lot of advisers really battle with”.
“We tend to find where the problem is, is that when they’re choosing – whether it’s a tailored [SMA], whether it’s a retail SMA – they’re not able to make a really true, really fact-based decision because they don’t have all the information in front of them”.
Information is presented by consultants or fund managers in widely varying formats, and too often the adviser’s decision defaults to which consultant or fund manager they have the best rapport with.
The problem rears its head again at review time when the adviser needs to explain how the client’s portfolio has performed and needs to be able to say more than, as Watmore suggested, “all good, it’s gone up”.
“I was asked recently by the regulator how can advisers make a really good review decision around the SMA at review time, from a best interest point of view, without having this data,” Jeffery-Bilich said.
“And it wasn’t a question to answer really easily.”
Jeffery-Bilich said it’s clear there is resistance to the idea of standardised reporting and greater transparency of SMA performance and construction, but it’s a necessary development to allow advisers to properly serve clients.
“The reason for SMAs is professional management,” he said.
“Where it’s customised, it’s tweaked for our particular need needs, and hence there’s perhaps a bit of a fear to report that or showcase that, but it needs to happen because sunlight is the best form of disinfectant.”
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