Speaking at the 13th annual Wraps, Platforms & Masterfunds conference in the Hunter Valley on Friday, Mr Inwood said some larger platforms have been consistently cutting fees down to around 175 basis points, but more nimble newer entrants are offering a similar service for around 40 basis points.
Mr Inwood questioned whether planners would be able to justify using a more expensive platform in a post-Future of Financial Advice world.
"How could it possibly be in a client's best interests to pay three times as much?" he asked.
Newer platforms have the same security, are regulated in the same way and have the same or sometimes better systems, he argued. New entrants are also more effectively unbundling their services so clients only pay for what they use, he said.
"It worries me that we're in a race to zero for platforms. The price will go down and down until there's no utility in actually owning a platform, where they become a loss leader for distribution," he said.
"So who's going to get to zero first and why?" he asked.
Mr Inwood said it was unlikely to be the new entrants because part of their game is to be bought.
"That's what new entrants are all about. They're going in there with the intention of selling," he said.
There is change happening in the platform space, through both regulatory and economic changes, and the industry needs to decide whether to embrace that.
It also needs to yield to the needs of the financial planner, whose primary concern is over yield, he said. "Innovation is not important at all to advisers; it's how much money they make," Mr Inwood said.
The industry also needs to work on utility because market pressures are no longer going to drive customers to the space.
"Industry funds have relied on high employment growth and high employment mobility. That appears to have disappeared. That means net new funds for masterfunds and platforms and industry funds and everyone with a similar business have to get it from somewhere else," he said.
"To grow, you now have to steal customers, and to steal customers you have to work on utility.
"You have to explain what you do and what it costs before you get any customers."
