The End of Apples vs. Oranges: How SMARS Is Standardizing SMA Reporting

Imagine trying to compare apples and oranges, only to discover both are labeled 'fruit' but priced and labelled entirely differently. This is the reality financial advisers face when comparing Separately Managed Accounts (SMAs) – until now. In a significant development for the Australian advice profession, the launch of the SMA Reporting Standard (SMARS) aims to transform how separately managed accounts are presented and compared across the industry. This initiative comes at a critical time, with SMA assets having quadrupled to approximately $200 billion in recent years, and $1 in every $2 now modelled in SMA’s on ProductRex.

Solving a Growing Problem

The rapidly evolving SMA market has created a challenging environment for advisers. Despite their growing popularity, SMAs have suffered from inconsistent reporting methodologies across platforms and managers, making meaningful comparisons difficult. The introduction of SMARS brings a sense of relief, providing a standard framework for reporting that will simplify the comparison process.

"At the moment, there is no standard set of disclosures for fee and asset allocation for SMAs in Australia," explains Nick Topham, a key figure behind the SMARS initiative. "Quite commonly, we see problems like SMAs that are truly identical, holding the same assets, being reported differently between different platforms."

For example, one platform might report 'management fees' as inclusive of GST and performance fees, while another might exclude GST and list performance fees separately, making a direct fee comparison incredibly difficult. This inconsistency forces advisers to spend hours reconciling data across platforms before making genuine like-for-like comparisons.

This inconsistency has created significant challenges for financial advisers when conducting due diligence and making recommendations to clients. Preliminary analysis of the 2025 Australian Financial Advice Landscape Report shows that managed accounts have consolidated their traction and continue to replace the use of managed funds (-4%), model portfolios (-2%) and direct investments (-3%). 

What the Standard Addresses

The new SMA Reporting Standard focuses on bringing uniformity to several key areas:

1. Consistent Naming Conventions: Ensuring identical portfolios have the same name across platforms
2. Fee Transparency: Standardizing how fees are calculated and presented
3. Asset Allocation Reporting: Bringing consistency to how asset allocations are reported and classified
4. Platform Information: Including standardised platform codes and availability

The standard specifically tackles reporting fields, including underlying investment fees (management fees and costs, performance fees, transaction costs), fee discounts, portfolio fees, and asset allocation types (actual, dynamic, strategic, tactical).

Why SMARS Matters for Advisers

For financial advisers, the benefits of this standardisation are substantial:

1. Enhanced Due Diligence

With standardised reporting, advisers can more effectively compare SMAs across platforms and managers, leading to more informed recommendations. This addresses a key pain point identified in the Landscape Report: Advisers reported spending significant time reconciling inconsistent information across platforms.

2. Efficiency Gains

The 2024 Landscape Report highlighted that tech-savvy practices operate with 55% fewer staff while maintaining high service standards. The SMARS initiative aligns with this efficiency trend by reducing the administrative burden of comparing SMA options, allowing advisers to focus more on client-facing activities. Industry experts estimate that advisers currently spend 3-5 hours per week navigating inconsistent SMA reporting – valuable time that SMARS can help reclaim for client service and practice development.

3. Improved Client Conversations

Standardised reporting enables clearer explanations of costs and portfolios to clients, addressing the report's finding that client communication is a primary concern for leading practices.

4. Regulatory Protection

In an era of heightened regulatory scrutiny for financial advice, SMARS offers a proactive, industry-led solution that could be crucial in demonstrating a commitment to transparency and best practices. A significant benefit of industry standards is that they mitigate the risk of more prescriptive and costly regulatory interventions down the line. The Landscape Report notes that practices spend substantial resources on compliance activities, and industry-led standards can help create more manageable regulatory frameworks.

Industry Collaboration

What makes SMARS particularly noteworthy is its collaborative, industry-led approach. The standard has been developed with input from platforms, responsible entities, and advisers, ensuring it addresses real-world needs while being practical to implement.

"The whole point of this standard is to have it as a collaborative and iterative approach," notes Topham. "We want to make it as easy as possible for SMA managers to adopt with minimal additional data requirements."

SMA managers' willingness to participate is only enhanced by the profession backing the standard and encouraging the product providers being used by advisers to participate and implement the standard. Continuing to struggle through comparing apples with oranges not only allows products to put change in the too-hard basket but undermines the practice's efficiency and, therefore, the cost to provide advice services to clients. 

Participating in the Standard

SMA managers, platforms, and practices running their own SMAs can participate in the standard for free. The process involves submitting SMA data for approval against the standard, and approved participants receive digital certification that can be shared with advisers and clients.

While individual advisers don't directly participate in the standard, they can play a crucial role by:

1. Understanding the standard and its benefits
2. Asking platform partners and SMA managers whether they comply with SMARS
3. Advocating for adoption among their product partners
4. Using compliance with the standard as a factor in their due diligence processes

Self-Regulation vs. Regulatory Intervention

One of the key motivations behind SMARS is to demonstrate the industry's capacity for effective self-regulation. The financial advice sector has experienced significant regulatory change in recent years, with the 2024 Landscape Report noting that 82% of licensed practices rely on their licensee to support them in adapting to regulatory requirements.

"ASIC has repeatedly said they would prefer self-regulation by the industry before they have to step in and create their own standard," Topham explains. This proactive approach, driven by the industry itself, could help avoid a situation similar to managed funds, where ASIC intervened with the RG97 disclosure requirements. It's a testament to the industry's ability to take charge and set its own standards.

The Future of Managed Accounts

As noted earlier, the growth in managed accounts continues, with managed accounts replacing managed funds, direct investments, and model portfolios. This growth makes standardisation increasingly important. As more advisers incorporate SMAs into their investment strategies, clear, consistent reporting will be essential for maintaining transparency and ensuring client interests remain at the center of advice.

Why Advisers Should Support SMARS

For financial advisers, supporting and encouraging participation in SMARS offers several strategic advantages:

1. Better Client Outcomes: Clearer fee structures and consistent reporting lead to better-informed investment decisions, ultimately benefiting the end client. 
2. Competitive Advantage: Advisers who understand and leverage the standard can provide more accurate comparisons and recommendations. 
3. Professional Standing: Supporting industry self-regulation demonstrates commitment to transparency and best practice.
4. Future-Proofing: As SMAs become more popular, early adopters of standardised approaches will be better positioned to scale their usage effectively.

Challenges and Outlook

While SMARS offers a transformative solution, widespread adoption will naturally take time and require ongoing collaboration. However, the industry's demonstrated commitment to this initiative and the clear benefits for all stakeholders suggest a strong path towards achieving widespread standardisation. The most forward-thinking practices are already preparing for this transition by familiarising themselves with the standard and its implications.

Conclusion

The SMA Reporting Standard represents a significant step forward for the Australian advice profession. Addressing inconsistencies in reporting promises to enhance transparency, facilitate more informed decision-making, and ultimately deliver better client outcomes.

As the $200 billion SMA market continues to evolve, standardisation through initiatives like SMARS will ensure sustainable growth. For advisers looking to optimise their practice, understanding, supporting, and leveraging this new standard should be a priority.

For practices serious about enhancing their operational efficiency while improving client outcomes, encouraging product providers to adopt SMARS represents a straightforward but meaningful action that aligns with the broader trends of increased transparency and standardisation shaping the future of financial advice.

What You Can Do Today

What can you do today to support SMARS? Firstly, familiarise yourself with the standard at smastandard.com.au. Secondly, ask your platform partners and SMA managers directly if they are compliant or planning to adopt SMARS. Finally, make it a key discussion point in your next industry peer group or licensee meeting. By actively championing SMARS, you are investing in a more efficient, transparent, and ultimately more successful future for your practice and the advice profession.

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