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"Misclassification" of clients as wholesale is just one symptom of a much broader issue.

When one segment of a market becomes chronically over regulated, while other segments of that same market remain untouched, there will always be a shift away from the over regulated segment. The original regulatory intent of protecting consumers becomes self defeating if that regulation is badly designed. It effectively pushes consumers into far more dangerous options.

It is why we are seeing financial advice consumers increasingly drawn to dodgy online promoters, and poor quality unlicensed advice from accountants, mortgage brokers, and property spruikers.

Defenders of regulatory change claim that consumers will be drawn to the more highly regulated segment, due to the additional safety it provides. That would be true if regulatory change was efficient, practical, and cost effective. But when it involves unnecessarily complex bureaucracy, and huge additional costs that must ultimately be passed on to consumers, most consumers turn away from it. The ASIC/O'Dwyer/Hayne/Frydenberg approach to financial advice regulation is ultimately doing consumers more harm than good.