The financial advice sector is being overcharged for compliance and compensation costs relative to its size and for actions that are unrelated to it, a parliamentary committee has been told.
Financial Planning Association of Australia (FPA) chief executive Dante De Gori told the parliamentary committee hearing that the steep rise in the annual ASIC adviser levy had become a major concern for financial planners.
“We don’t believe the way the formula is calculated and the way it is dispersed is equitable and fair,” De Gori said during the House of Representatives Standing Committee on Economics hearing late last week.
“We want that [the levy] to be reviewed. There are activities that we’re aware ASIC undertakes that have nothing to do with financial planners, yet they are placing that cost on financial planners through this levy.”
He noted the levy is unsustainable and individual financial planners ultimately hold the cost burden of the licensee fee.
“In any industry, if a cost or a fee was to increase by 340 per cent over four years, that industry would be unsustainable,” he said.
Also addressing the committee, Association of Financial Advisers president Michael Nowak said individual advisers are now paying for the past mistakes of large institutions alongside other sizeable costs required to provide advice.
“Financial advisers need to pay a licensee fee each year, for many $70,000 or more. Professional indemnity insurance premiums have also increased significantly and the policy excesses have increased,” Nowak said.
“The levy that advisers pay to ASIC has more than trebled to $3138 in the last three years. Seemingly small business financial advisers are continuing to pay for the legal action taken against the large institutions following the royal commission, despite the fact that all of the four big banks have exited financial advice.”
In his comments to the committee, Synchron director Don Trapnell noted the impost on advisers would continue through an additional levy that would provide 75 per cent of the funding for the proposed Compensation Scheme of Last Resort.
“On the heels of an ASIC levy that continues to climb, in fact by 30 per cent this year, financial advisers have now been informed that the bulk of the Compensation Scheme of Last Resort is proposed to come from them,” Trapnell said.
“Of the 70,500 Australian Financial Complaints Authority (AFCA) complaints, 997, or 1.4 per cent, involved advisers. Of the 997 complaints involving advisers, 974 were settled, thus leaving only 23 unsettled complaints involving advisers. Unsettled complaints from the advice sector therefore represent 0.03 per cent of all AFCA complaints, yet [the small business advice] sector is to fund 75 per cent of the scheme.
“There’s only one word for that, that’s disgraceful. In what other universe is this kind of penalty passed onto small business with so little justification?”
