Aberdeen Standard Investments managing director Brett Jollie told Investor Daily the agreement, due to be negotiated between the two countries by the end of 2020, could see Australian fund managers given free entry to the UK market for the first time since the UK joined the EU.
“The EU, which the UK has been part of since 1973 has meant that we haven’t been able to negotiate bilateral agreements with the UK during that time, so it’s 47 years since we’ve been able to hold discussions like we’re about to kick off now,” Mr Jollie said.
“If you look at the EU passport system they have in place for banks and financial services, this enables firms authorised in any EU state to trade freely with minimal authorisations. It’s similar to what we’ve created in Asia, where funds regulated in one market can be ‘passported’ into other markets.
“There are barriers between Australia and the UK in terms of regulation and taxation, and the legal form of the funds themselves would be something that would need to be looked into, but in terms of can [a similar system] be done, absolutely.”
A paper submitted by Aberdeen to the Australian Department of Foreign Affairs and Trade suggests a number of economic benefits that could arise to the local financial services industry from an Australia-UK passport regime, including greater scale and increased revenue for financial services firms, and increased consumer choice.
Australian investors would also benefit, Mr Jollie said, as global asset managers could offer lower-cost products to the local market.
“It would increase competition in the funds management sector which would drive efficiencies, and it would drive down costs for [an asset manager’s] local business,” he said.
“It would ultimately allow us to develop stronger financial positions, which we would be able to pass on to clients.”
Mr Jolie said the removal of trade barriers between the two countries would also help stimulate economic and job growth in Australia, by helping increased capital from UK pension funds to flow into the local economy to aid recovery from the COVID-19 crisis.
“If we look at investment into the UK, there’s a great deal of investment going that way and vice versa – the UK has around $500 billion worth investment in Australia and we are looking at $300 billion invested into the UK in each year,” he said.
“If you look at super, savings from our super system are funding the transformation of central London, [helping create] new homes and workplaces for 30,000 people. So anything that can remove barriers to trade and improve the flow of capital can only assist in creating jobs and rebuilding the economies on both sides.”