Investment review is on

THE securities regulator will push ahead with a review of investment platforms that collectively house more than $100 billion of superannuation savings.

By InvestSMART · 14 Mar 2012

By InvestSMART ·
14 Mar 2012

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THE securities regulator will push ahead with a review of investment platforms that collectively house more than $100 billion of superannuation savings.

The review is likely to boost rules protecting investors that have savings sitting on platforms, giving them the same rights as though they directly owned the products.

It could also pave the way to make it easier for fund managers to have investment products listed on an investment platform, a move that could pressure returns of platform providers.

Used by financial planners, investment platforms are the link, or "hub", in the chain between the consumer and underlying fund product. With the market dominated by the big banks, platforms offer benefits to financial planners, given they can easily manage the investment portfolios of clients.

The issue of control of the platform market became a sticking point with the competition regulator when NAB attempted its $14 billion move on AXA Asia Pacific. This ultimately forced NAB to shelve its bid for the wealth manager.

Financial advisers usually use two platforms to manage client funds, but sometimes three. At least 50 per cent of advisers use Commonwealth Bank-owned First Choice, followed by 30 per cent that use Westpac's BT Wrap. Among the Australian Securities and Investments Commission's proposals, platform operators would be required to meet standards on corporate structures and compliance issues.

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Frequently Asked Questions about this Article…

What is the ASIC review of investment platforms and why does it matter to everyday investors?

The Australian securities regulator (ASIC) is pushing ahead with a review of investment platforms that collectively hold more than $100 billion in superannuation savings. The review aims to strengthen investor protections and could change how platforms operate, so everyday investors with money on a platform may see improved rights and transparency.

How much superannuation money is held on investment platforms today?

Investment platforms collectively house more than $100 billion of superannuation savings, making them a significant channel for retirement money and a focus of the ASIC review.

How could the ASIC review improve investor protections on platforms?

ASIC’s proposals are likely to boost rules protecting investors who have savings on platforms, potentially giving them the same rights as if they directly owned the underlying investment products, which would increase consumer protections and clarity.

Will the review make it easier for fund managers to list products on platforms and what could that mean for returns?

The review could pave the way for fund managers to more easily have investment products listed on platforms. That greater competition for listings could put pressure on platform providers’ returns and fees, potentially benefitting investors through better pricing or more choice.

How do investment platforms work and why do financial advisers use them?

Investment platforms act as a ‘hub’ between the consumer and the underlying fund products, allowing financial planners to easily manage multiple client portfolios. They streamline administration, reporting and trading for advisers, which is why planners commonly use platforms.

Which platform providers are most commonly used by Australian financial advisers?

The market is dominated by the big banks. At least 50% of advisers use Commonwealth Bank–owned FirstChoice, and about 30% use Westpac’s BT Wrap, making these two platforms especially widely used among advisers.

Why did a competition issue arise when NAB tried to buy AXA Asia Pacific, and how does that relate to platforms?

When NAB attempted a $14 billion takeover of AXA Asia Pacific, the competition regulator raised concerns about control of the platform market. Those control issues ultimately forced NAB to shelve the bid, highlighting how consolidation in platforms can attract regulatory scrutiny.

What kinds of standards might platform operators have to meet under ASIC’s proposals?

ASIC’s proposals would require platform operators to meet standards on corporate structures and compliance issues. These changes are intended to improve governance, transparency and consumer protection across platform operators.