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Wholesale investor test changes will advantage big end of town

Mike Taylor26 March 2024
wholesale investors

Financially competent, astute and savvy consumers will be forced into retail offerings with commensurate higher costs and lower returns if the Government changes the wholesale investor settings, according to Brisbane-based specialist wholesale investment manager, Marquette Properties.

In one of the first submissions filed with the Parliamentary Joint Committee on Corporations and Financial Services inquiry into the Wholesale Investors and Wholesale Client tests, Marquette Property managing director, Tobias Lewis has also warned that such a move also carries with the risk of advantaging the big end of town at the expense of smaller firms.

The Marquette Property submission said lifting the wholesale investor threshold from its current $2.5 million net assets level to more than $4.5 million “would have devastating effects on our existing investor base, our assets and our capacity as a business going forward”.

“We have built our business over the last 14 years on the basis of our successful track record of achieving strong returns for all of our Wholesale clients. The proposed changes would dramatically alter how we operate and service our investor base, as well as our existing investor’s current holdings. For example, the staff within our own business would no longer qualify for Wholesale designation under the changes,” the submission said.

“We believe these changes are drastically inconsistent with the desires of our clients and many aspirational Australians looking to build wealth.”

“We operate under an Australian Financial Services Licence (AFSL) in a highly regulated and audited industry with considerable oversight and ongoing reporting.”

“In conclusion, we strongly feel that the proposed ‘reforms’ will be a harmful change for our investors, our industry, and our business due to the following key reasons:

− Large numbers of existing wholesale investors would be disadvantaged (i.e. they would be prohibited from participating in investments that they have enjoyed in the past);

− Financially competent, astute and savvy consumers would be forced into retail offerings with their commensurate higher costs and lower returns;

− Consumer choice, diversification and access to deal and investment flow would be greatly reduced;

− Competition would be significantly lessened and “the top end of town” will be benefited by driving out smaller firms; and

− The non-bank lending sector that provides significant funding to Australian businesses would be starved of funds.

“We are responsible managers of our investor’s funds and we, ourselves, are hardworking, tax paying members of this industry. We do not want our investors or ourselves punished through no fault of our own,” it said.

Mike Taylor

Mike Taylor

Managing Editor/Publisher, Financial Newswire

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