Key takeaways
- Income Asset Management (IAM) built its fixed income MDA as a natural extension of its existing direct asset ownership product. The move opened a new investor segment and created recurring fee revenue.
- The service operating model should be agreed before any technology configuration begins.
- Fixed income MDAs need more granular asset classification than equities. They also need different handling of drift, coupon flows and corporate actions.
- Separation of duties and transparency should be embedded at the system level, not managed manually.
Deciding to offer a managed discretionary account (MDA) service is one thing. Building one that works – at scale, in a specialist asset class, with the right governance and technology in place – is another matter entirely.
That was the central theme of our recent Stockbrokers and Investment Advisers Association (SIAA) webinar, MDAs in practice: Building and scaling a managed discretionary account offering. The session brought together Nick May, Chief Technology Officer at Income Asset Management (IAM), and Andy Robertson, Chief Innovation Officer at Chelmer, and was moderated by Maria Lykouras, CEO of SIAA. This article draws on the key insights from that session.
The business case: why IAM introduced a managed discretionary account service
IAM’s decision to build an MDA offering wasn’t driven by a single factor; it was a convergence of several. The MDA was a natural extension of their existing direct asset ownership product. IAM could launch it by leveraging internal capability and its existing cost structure, without significant new investment.
Critically, it opened access to a segment of the market IAM couldn’t previously serve: investors who want fixed income exposure without the deal-by-deal interaction of a traditional broking relationship. Recurring fee revenue, rather than volatile brokerage income, was also a meaningful part of the picture.
Why IAM chose Myriad – and why the relationship mattered
IAM didn’t go to market and run a technology selection process. The conversation with Chelmer was already there. As Nick May explained during the webinar, the attraction was that Myriad’s MDA functionality was a natural extension of what IAM was already doing on the platform. When the product was ready to build, the conversation with Chelmer picked up without missing a beat.
That foundation of trust made the implementation significantly more efficient. Both teams already understood each other’s business well enough to move quickly through decisions and focus on the problem rather than the relationship.
What MDA implementation actually involves
Before any technology configuration begins, the more important work is agreeing on the service operating model. That means deciding who does what in the business, what each team can see and do in the system, and what clients need to know about the service to trust it. (For a broader view of the process, see our complete guide to managed accounts implementation.)
Myriad’s low-code, no-code framework meant IAM’s team could visualise and prototype their own views, workflows and client portals from early in the process. Workshop-based sessions allowed both teams to make decisions in real time, with prototypes refined over time before a staged rollout into production.
How a fixed income MDA differs from equities
Most MDA technology is built around equities. Fixed income has its own idiosyncrasies, and they matter.
Asset classification requires additional specificity – Coupon Type, Credit Ratings, Payment Rank, and groupings across Syndicated Loans, asset-backed securities (ABS) and investment grade bonds. IAM adopted a building brick, or ‘model of models‘, approach. This is a hierarchy of underlying models that provides flexibility and scalability as the service evolves, with minimum parcel sizes that align naturally with IAM’s product allocations.
Managing drift and variation is also materially different from equities. Coupon flows can create delays due to timezone differences and custodian reconciliation. Surprise corporate actions – redemptions, amortisations, rate changes – require the system to respond without breaching mandate rules. Myriad’s switcheroo functionality allows IAM to substitute assets and remain aligned to mandate when liquidity or timing constraints arise.
MDA governance: separation of duties and transparency
Two principles need to be embedded at the system level: separation of duties and transparency.
Myriad handles the separation of duties naturally. The investment committee, facilitation team, operations and front office each have clearly defined access and visibility, without the business needing to engineer that governance manually. And when relationship managers can see exactly what a client holds, how the portfolio aligns to mandate and where it deviates, the nature of client conversations changes for the better.
What’s next: blended and hybrid MDA mandates
The session closed with a forward-looking exchange about blended and hybrid mandates. In these, the investment committee sets the core model, but individual clients or advisers retain input over specific holdings. It is not a problem IAM has fully solved yet, but the direction is clear and the technology to support it largely exists.
Getting there requires the same discipline that made the initial build successful: the right operating model, the right governance structure, and technology that handles complexity systematically rather than leaving it to people to manage manually.
Read the full case study on the IAM and Chelmer MDA build: How IAM launched a fixed income MDA in under a year. It covers the end-to-end journey from initial product design through to live portfolios.
For firms exploring what a managed discretionary account service looks like for their business, visit our managed and discretionary accounts page or request a Myriad demo. To learn more about the SIAA and upcoming industry events, visit stockbrokers.org.au.
Related reading
- Managed accounts: The complete guide to technology, growth and implementation for financial institutions
- SMA vs MDA: Why the question matters more than the answer
- Managed discretionary account technology: How to scale adviser capacity
Frequently asked questions about managed discretionary accounts
What is a managed discretionary account (MDA)?
A managed discretionary account (MDA) is a service where an investor authorises a licensed provider to make investment decisions and place trades on their behalf, within an agreed investment program or mandate. The provider doesn’t need to seek approval for each transaction, and the investor keeps beneficial ownership of the underlying assets.
How is an MDA different from a traditional broking relationship?
In a traditional broking relationship, the client is involved in each trade decision. An MDA removes that deal-by-deal interaction, because the provider manages the portfolio within the agreed mandate. For IAM, this opened access to investors who want fixed income exposure without transacting trade by trade.
Why do firms introduce an MDA service?
Common drivers include extending an existing product, reaching new investor segments and shifting from volatile brokerage income to recurring fee revenue. IAM’s MDA was a natural extension of its direct asset ownership product. It could be launched using existing capability and cost structure, without significant new investment.
What should be agreed before implementing MDA technology?
The service operating model should come first. That covers who does what in the business, what each team can see and do in the system, and what clients need to know to trust the service. Only then should technology configuration begin.
How is a fixed income MDA different from an equities MDA?
Fixed income MDAs need more detailed asset classification, such as coupon type, credit rating and payment rank. They also handle drift differently. Coupon flows can be delayed by timezone differences and custodian reconciliation, and corporate actions like redemptions, amortisations and rate changes must be managed without breaching mandate rules.
What is a ‘model of models’ approach in an MDA?
A ‘model of models’, or building brick, approach uses a hierarchy of underlying models to build client portfolios. IAM uses this approach in Myriad to gain flexibility and scalability as its fixed income MDA evolves. Minimum parcel sizes align with its product allocations.
How does MDA technology support separation of duties?
Good MDA technology gives each function clearly defined access and visibility at the system level, including the investment committee, facilitation team, operations and front office. With Chelmer’s Myriad platform, this governance is built in rather than engineered manually by the business.
What are blended or hybrid MDA mandates?
Blended or hybrid mandates combine a core model set by the investment committee with input from individual clients or advisers over specific holdings. Per the SIAA webinar discussion, it’s an emerging area where the direction is clear and the supporting technology largely exists.