Invest
Wholesale investor rules don’t need changing
An overlooked implication of raising the wholesale investor threshold is the impact it would have on retirees, SMSFs and other investors reliant on an income for their livelihood, writes James Mawhinney.
Wholesale investor rules don’t need changing
An overlooked implication of raising the wholesale investor threshold is the impact it would have on retirees, SMSFs and other investors reliant on an income for their livelihood, writes James Mawhinney.
Investment products offered to wholesale investors in Australia could become out of reach for many should regulations result in an increased threshold to become eligible to invest in such products. This could spell disaster for many existing wholesale investors who need to access income-producing investment products to sustain their income stream.
The impact of low interest rates on bank deposits has forced many wholesale investors to look beyond traditional financial institutions to those non-bank finance companies that are filling the growing credit gap left by restrictive bank lending policies. A handful of commentators have suggested increasing the threshold, arguing a large portion of investors that may currently be classified as wholesale, may not have the financial literacy to understand the products they invest in, and therefore may be taking more risk than they should.
However, when you consider the steps required to establish a self-managed superannuation fund, of which there are thousands in Australia, it suggests most fund managers would be qualified to make an investment. An increase in the wholesale investor threshold would potentially render many self-managed superannuation funds defunct or a considerably smaller range of investment options to choose from.
Any changes to regulation would stifle the ability of investors to access regulated financial products and result in less competition for traditional investment companies and banks.
Increasing the wholesale investor threshold would mean the average self-funded retiree would be unable to invest funds in finance companies that are filling the enormous credit gap left by the banks. It simply doesn’t make sense, particularly at a time where investors are struggling to earn 2 per cent per annum on their idle funds.
We often have to turn away investors with $400,000-$450,000 to invest who have done their homework and want to invest with us, simply because they don’t meet the $2.5 million net assets or $250,000 per year income test. The threshold is already high, and if this was increased to levels that only institutional investors can participate in, you will wipe out an entire market that is providing a more equitable distribution of capital between investors and businesses needing access to funding.
If an increase in the wholesale investor threshold was to be put to Parliament, it would no doubt be met with considerable resistance from existing wholesale investors and the rapidly growing non-bank finance company industry. Given the challenges banks are currently facing, it begs the question of whether the traditional institutions should be protected, or retaining the existing wholesale investor threshold encourages fair competition, a re-allocation of capital and provides investors with the choice of seeking higher returns.
James Mawhinney is the founder and managing director of Mayfair 101.
Investment insights
Centuria announces senior internal promotions, strengthening leadership team for new property growth cycle
Centuria Capital Group (ASX: CNI or "Centuria") has strengthened its senior management structure with several internal promotions, effective from Monday, 15 April 2024. The new senior roles are part ...Read more
Investment insights
Institutions and wealth managers favour fixed income over equities, research shows
New research from Managing Partners Group (MPG), the international fund management group, shows professional investors believe fixed income is becoming more attractive than equities over the next 12 ...Read more
Investment insights
Gold prices soar to record high: Two surprising factors fueling the surge
Gold prices have hit a fresh record high, nearing $2,300 an ounce in Thursday trading, and while geopolitical tensions and expectations of interest rate cuts by the US Federal Reserve are commonly ...Read more
Investment insights
Alternative fund managers expect increased fines for regulatory breaches, survey reveals
A new study by Ocorian, a market leader in regulation and compliance services, has revealed that alternative fund managers anticipate a rise in fines for breaking regulations in their sectorsRead more
Investment insights
Institutional investors set to increase allocations to illiquid assets, MPG research reveals
A new study by international asset management company Managing Partners Group (MPG) has found that more than three-quarters (78%) of institutional investors and wealth managers plan to increase their ...Read more
Investment insights
Vanguard reduces management fee for its Australian Government Bond Index ETF
Vanguard Australia has announced a reduction in the management fee for its Vanguard Australian Government Bond Index ETF (ASX:VGB) by four basis points to 0.16% per annum, effective from Monday. Read more
Investment insights
Institutional investors and wealth managers recognise digital assets' role in diversification
A new global research study by London-based Nickel Digital Asset Management (Nickel), a regulated and award-winning digital assets hedge fund manager, reveals growing mainstream acceptance of digital ...Read more
Investment insights
Chinese and European brands dominate top 5 most valuable insurance brands: Brand Finance report
The latest Brand Finance Insurance 100 2024 report reveals that Chinese and European brands continue to dominate the ranking of the world's most valuable insurance brands. Read more
Investment insights
Centuria announces senior internal promotions, strengthening leadership team for new property growth cycle
Centuria Capital Group (ASX: CNI or "Centuria") has strengthened its senior management structure with several internal promotions, effective from Monday, 15 April 2024. The new senior roles are part ...Read more
Investment insights
Institutions and wealth managers favour fixed income over equities, research shows
New research from Managing Partners Group (MPG), the international fund management group, shows professional investors believe fixed income is becoming more attractive than equities over the next 12 ...Read more
Investment insights
Gold prices soar to record high: Two surprising factors fueling the surge
Gold prices have hit a fresh record high, nearing $2,300 an ounce in Thursday trading, and while geopolitical tensions and expectations of interest rate cuts by the US Federal Reserve are commonly ...Read more
Investment insights
Alternative fund managers expect increased fines for regulatory breaches, survey reveals
A new study by Ocorian, a market leader in regulation and compliance services, has revealed that alternative fund managers anticipate a rise in fines for breaking regulations in their sectorsRead more
Investment insights
Institutional investors set to increase allocations to illiquid assets, MPG research reveals
A new study by international asset management company Managing Partners Group (MPG) has found that more than three-quarters (78%) of institutional investors and wealth managers plan to increase their ...Read more
Investment insights
Vanguard reduces management fee for its Australian Government Bond Index ETF
Vanguard Australia has announced a reduction in the management fee for its Vanguard Australian Government Bond Index ETF (ASX:VGB) by four basis points to 0.16% per annum, effective from Monday. Read more
Investment insights
Institutional investors and wealth managers recognise digital assets' role in diversification
A new global research study by London-based Nickel Digital Asset Management (Nickel), a regulated and award-winning digital assets hedge fund manager, reveals growing mainstream acceptance of digital ...Read more
Investment insights
Chinese and European brands dominate top 5 most valuable insurance brands: Brand Finance report
The latest Brand Finance Insurance 100 2024 report reveals that Chinese and European brands continue to dominate the ranking of the world's most valuable insurance brands. Read more