Australian investors pay for regulatory delays: Praemium

Australian delays in adopting regulations currently in place in the UK, which are facilitating a shift from insurance to a managed investment focus, will have a high cost for local investors due to the dominance of vested interests in the Australian market, according to Praemium.

The recently completed UK Retail Distribution Review shows that the UK has gone much further than Australia in banning commissions to financial planners from the end of 2012. This means Australia could lose its role in leading the world in the development of financial services and now risks falling behind, said Praemium group managing director Arthur Naoumidis.

The same regulations have provided an opportunity for a software provider such as Praemium, because planning groups would have to move all their assets into platforms, he added.

“Originally there were parallels between Australia and the UK regarding the shift from insurance to a managed investments focus. This triggered Praemium’s move to the UK after listing on the Australian Securities Exchange. While Australia initially had an advantage with the early acceptance of master funds and subsequently of wraps, the traditional investment system of wraps has become an inefficient legacy with multi-billion dollar fees,” he said.

“Local investors will have to pay more, because old legacy infrastructure like wraps are being retained and the consumer protections in place are not as strong as those available to their counterparts in the UK. If this is happens, Australian investors will become poor cousins of UK investors,” he said.