The Financial Advice Association of Australia (FAAA) has called on the government to reconsider its decision to end the Australian Securities and Investments Commission (ASIC) funding levy freeze, stating the model used to calculate the financial adviser levy is flawed.
FAAA chief executive Sarah Abood raised concerns about the fairness of the revised levy, highlighting the freeze in the past two financial years resulted in considerable savings for the financial advice industry and consumers.
“We are extremely concerned to see the impact of the end of the freeze on the ASIC levy resulting in an almost tripling of the per-adviser cost. This comes before the recommendations of the recently released review into the IFM (industry funding model) for ASIC have been implemented. The review highlighted several deficiencies in the current model and the need for reform,” Abood stated.
“When the levy was originally frozen, at $1142 per adviser, the profession had substantially more participants than it does now. [As a result of the levy increase] advisers will be forced to pass the cost increase on to consumers at a time when we are all working hard to make financial advice more affordable.
“We call upon the government to urgently reconsider the removal of the freeze in light of the flaws in the model being used to calculate the levy and the negative impact on Australian consumers who will ultimately bear the costs.”
She acknowledged the government had accepted recommendations for fair future charges, including equitable distribution of enforcement costs and addressing unlicensed participants, but highlighted concerns regarding the transfer of costs associated with tax enforcement measures.
“Firstly, it is evident that important recommendations have not been accepted in the IFM review. For example, current financial advisers appear to be being charged for enforcement activities undertaken against past entities that in many cases are no longer even in the profession,” she said.
“This breaches one of the major principles of the IFM, that those who create the need for regulation should bear the primary cost.
“Even more concerning is the complete lack of clarity or transparency on what happens to the proceeds of enforcement activities. Financial advisers are funding litigation costs against large institutions, when the fines are going to consolidated revenue, and advisers are left with a tiny fraction of these costs being recovered.
“The second key problem is that even those suggestions in the review that have been accepted are not reflected in this year’s Cost Recovery Implementation Statement. It’s deeply unfair to proceed to charge advisers using a model that is already acknowledged to need reform.”
Financial Services Minister Stephen Jones announced on Monday that the temporary relief program for the ASIC financial adviser levy will be discontinued. As a result, ASIC has released the revised levy, set at $3217 per adviser, nearly triple the rate charged in 2022.