Five financial services industry bodies have strongly opposed the Australian Securities and Investments Commission’s (ASIC) decision to increase the levy charged to financial advice licensees and advisers.
Describing the recent levy increase as “shameful”, the SMSF Association, Chartered Accountants Australia and New Zealand, CPA Australia, Financial Planning Association of Australia (FPA) and Institute of Public Accountants warned it would lead to a greater number of advisers exiting the industry.
“The fee hike represents an increase of 160 per cent over two years for financial advisers. Meanwhile, the number of financial advisers has fallen from around 25,200 in 2017/18 to approximately 21,200 now,” the bodies said.
“The total cost levied by ASIC is now $1500 per retail advice licence, plus an additional $2426 per authorised adviser under the licence. This means a sole practitioner holding a limited licence can expect to be hit with a $3926 bill from ASIC within weeks.”
The bodies also called on the federal government to immediately review the ASIC funding model, noting the current model was contributing to the decline in financial adviser numbers and leaving remaining advisers with a “disproportionate cost burden”.
“The industry funding model has not changed despite major shifts in the financial advice sector,” they pointed out.
“Declining adviser numbers mean that remaining participants must shoulder a heavier proportion of the total cost. This is impacting the viability of remaining businesses. Ultimately, this has flow-on effects for competition and the accessibility and affordability of financial advice.”
The organisations highlighted the inaccuracy of ASIC’s preliminary cost estimates and penalties being diverted to consolidated revenue as additional concerns.
“ASIC provides an estimate for each year’s industry levy approximately six months before the final amounts are invoiced. Experience has shown that these are often inaccurate. This makes it difficult for financial advice businesses to budget for their operating costs,” they said.
“Fines and penalties go into consolidated revenue. Retaining these would help offset ASIC’s operating costs and put a stop to the existing cycle of levy increases.”
In response to ASIC’s fee hike, the government should reduce or remove the latest industry funding levy increase, they said.
The bodies also called for ASIC to be funded from consolidated revenue in order to undertake its functions and for the regulator’s industry funding levy to “reflect the cost of regulation and not fund other budgetary measures”.
In February, the FPA called on the government to make it more affordable for financial advisers to practice, highlighting ASIC’s industry levy as a key concern.
ASIC published the new levies as part of its 2019-20 Cost Recovery Implementation Statement, which provides regulated entities with details of ASIC’s forecast regulatory costs and activities by industry and subsector.
“ASIC is acutely aware of the challenges facing many businesses due to COVID-19 and is committed to working with regulated entities facing difficulties paying industry funding levies,” it stated in a media release.
“ASIC will consider waivers due to the impact of COVID-19 on a case-by-case basis.”
