Advisers should prepare for MIS changes

A year on from Treasury announcing plans to review the managed investment scheme (MIS) regulatory framework and following considerable media speculation that the threshold to qualify as a sophisticated investor is set to increase from $2.5 million in net assets to $4.5 million, no official decision has been released.

In response to the speculation, Financial Services Minister Stephen Jones said nothing will be decided until Treasury has completed its review.

“The review is ongoing and Treasury is still looking into the things that they haven’t made their recommendations to government on,” Jones said.

“So obviously, government hasn’t made any decisions about this either. When we do, we’ll maintain our commitment to the Australian people and to investors to work collaboratively and consultatively to make sure that we get the best outcomes for Australian consumers and investors.”

Despite this, MIntegrity co-chief executive officer Amanda Mark said advisers should still try to prepare for the changes.

“The financial services industry is constantly evolving and the potential changes to client classifications can be both exciting and challenging for advisers,” Mark said.

“Now is the time for the industry to take a proactive approach and be prepared to navigate the future with confidence, regardless of the final decisions made by the Treasury.”

As the industry awaits more information from Treasury, Mark gave four tips on how advisers can ensure they are best prepared for regulatory change.

“First and foremost, take a deep dive into existing regulations. Advisers should thoroughly review the current sophisticated investor tests outlined in Section 761G of the Corporations Act,” she said.

“They should understand the different categories and corresponding thresholds used for client classification.

“Secondly, leverage client data and analyse the information about the clients. Take a proactive approach and identify areas where minor adjustments can be made now to future-proof your operations.”

Advisers also need to identify and assess which of the proposed options, if implemented, could have the most significant impact on their businesses.

“They should analyse client portfolios across existing wholesale categories and evaluate the potential impact on clients for sophisticated investor tests,” Mark said.

“Finally, advisers should embrace client data to model scenarios with potential increases in thresholds. By doing so, they can identify areas where their business might face the most significant impact and develop appropriate strategies.”