The industry funding levy applied by the Australian Securities and Investments Commission (ASIC) to each financial adviser is growing at an unsustainable rate and needs to be reviewed urgently to prevent further damage to advice practitioners, according to two representative bodies.
The Financial Planning Association (FPA) and Stockbrokers and Financial Advisers Association (SAFAA) have called for changes after ASIC last week released its latest estimates for the adviser levy for the 2021 financial year.
The Cost Recovery Implementation Statement 2020-21 states each advice licensee will be required to pay $1500 each, as well as a further $3138 per adviser for the financial year, which is a $712 or 31 per cent increase from the previous year.
The corporate regulator stated the levies were based on the number of registered financial advisers who were authorised to provide personal advice to retail clients at the end of the financial year and the new levy was based on 2999 Australian financial services licensees and 21,308 advisers.
FPA chief executive Dante De Gori said the formula for the levy was not equitable or sustainable and had to reviewed to prevent the further closure of advice practices.
De Gori noted the levy had increased by 340 per cent over the past four years and estimates of the levy each year were inaccurate.
“The levy amount each year has proved to be unpredictable, which makes it practically impossible for a financial planner to effectively budget for this business cost, particularly by a profession that is dominated by small and medium-sized businesses,” he said.
“This year, the estimate is $1500 + $3183, a further increase of 31 per cent from last year. The FPA notes last year’s estimate was wrong by 54 per cent, so the actual levy figure could be significantly higher.
“The levy has been increasing at a dramatic rate that far surpasses the rate of revenue growth for most financial planning businesses or increases to ASIC’s budget. This is being compounded as the number of registered financial planners in Australia have continued to decline, from whom the levy must be recovered.”
SAFAA chief executive Judith Fox said the increase comes as the number of financial advisers declines, while adding to the compliance burden of those still in the industry.
“The recent increases to the ASIC levy are not sustainable and are being unfairly attributed to the current population of financial advisers,” Fox said.
She added that in the past year, only 0.6 per cent of complaints made to the Australian Financial Complaints Authority were against the stockbroking and listed securities advice sector.
“It appears to our members that ASIC is funding action against large financial institutions that were the subject of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry by charging those entities not called before the commission,” she said.
She also noted the inaccuracy in ASIC estimates regarding the size of the levy, saying they had routinely been between 25 per cent and 55 per cent less than the final levy amount, and called for levies to be matched to industries.
“We call on the government to urgently review the ASIC levy model and [make] it more granular and risk-based to more accurately reflect the firms that are generating the enforcement and supervisory work,” she said.
