Regulation roadblock in SIV program
The Significant Investor Visa (SIV) program may significantly improve the net flow position of the local asset management industry — but the current regulatory environment may be an impediment to attracting some investors.
An SIV is offered to foreign investors that invest at least $5 million in Australian sovereign bonds, local (non-investment) private business and Australian managed funds.
Although the potential impact on the direct real estate investment has been a focus by the financial services industry, it does not count as an "eligible asset" under the program.
However, investors can still access this market indirectly through funds that invest in Australian assets, according to Tria Investment Partners managing director Andrew Baker.
The challenge for asset managers, however, will be distribution, particularly as they come head to head with the looser regulatory world of real estate agents, many of whom are already partnering with Chinese firms to design and develop products for their clients.
"The typical model used by Hong Kong financial advisers to attract mainland Chinese clients, for example, sees more than half the advice income paid to local distribution partners who source new investors," Baker said.
"This type of model is of course inconsistent with the conflicted remuneration provisions of the Future of Financial Advice."
To get the most out of the SIV program, Baker said asset managers will need to be part of a group with a presence in key offshore markets and a well-designed distribution model which also satisfies current regulatory requirements.
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