Investment platforms, such as master trusts and wraps, are too expensive and volume rebates are largely to blame for the lack of low-cost options in Australia, according to industry participants.
"If we cut out various revenue sources from the industry then many businesses will fail - that is being said. But what I'm saying is that those revenue sources were artificial and have masked the need for change," Paragem managing director Ian Knox said.
"The platform industry huffs and puffs and still hasn't brought to the market a low-cost offering relative to other countries, like America," Knox said.
"The industry has created the need for the regulator to step in."
Treasury is currently in discussions with platform providers and stakeholders about the proposed ban on volume rebates paid by platforms to adviser dealer groups.
Opponents of the ban on rebates said the system had been incorrectly lumped in with the government's fee and commission crackdown.
But dealer group Snowball Group agreed that platforms were too expensive and that benefits of scale would be better passed on to consumers.
"Our view is simple - the cost of platforms and fund management needs to come down. The efficiency dividend has to flow through to the consumer more than it has in the past," Snowball managing director Tony McDonald said.
Although he sees limited circumstances where rebates could exist while still passing on scale benefits and without "polluting" advice, he said dealer groups should take the reins in their own hands.
"I would rather see advice businesses step up and take control of the efficiency dividend. That ultimately means having to have a hard look at becoming the responsible entity (RE) and trustee," he said.
"We already have an RE and we will have a hard look at becoming a trustee," McDonald said.
This would not mean dealer groups have to cut their relationship with platforms, he said. They can become the owner of an administration system, but still outsource the development and maintenance.
"In a legal sense, it means having a private label rather than a badge," McDonald said.
