ASIC admits 27,011% advice cost difference

A recently released dashboard report on the Australian Securities and Investments Commission (ASIC) industry funding model has underscored why the regulator is facing questions about why it spends so much overseeing retail financial advice compared to wholesale advice.

The ASIC data covering 2022-23 confirms that when it comes to overseeing the financial advice sector, ASIC’s actual costs for the period came to $47.593 million for “licensees that provide personal advice to retail clients on relevant financial products”.

By comparison, it confirms that it spent just $176,000 overseeing “licensees that provide personal advice to wholesale clients only”.

ASIC has acknowledged the difference between retail and wholesale costs is “27,011%”.

As well, it shows that ASIC incurred actual costs of $2.253 million overseeing “licensees that provide general advice only” and a mere $96,000 on “licensees that provide personal advice to retail clients that are not relevant financial products”.

The amount being expended overseeing each sub-segment will raise questions with financial advisers about how much ASIC is likely to dedicate to the oversight of “qualified financial advisers” either inside or outside of superannuation funds.

ASIC has already faced questions on notice from the Senate Economics References Committee within which NSW Liberal Senator, Andrew Bragg, refered an earlier suggestion that ASIC had spent just $35,000 on wholesale financial advice providers in 2022-23.

He asked whether such a figure was likely representative of all the work that had been done on wholesale advice providers by ASIC.

ASIC has responded by pointing to the $176,000 figure claiming that it represented “ASIC’s regulatory effort for that subsector that year”.

“ASIC continues to monitor threats and harms, including emerging threats and harms, across various sectors throughout each year, adapting to any changes and reassessing our priorities if required. If ASIC identifies increased rates of misconduct towards wholesale clients, we will reassess our priorities and the focus of our regulatory efforts accordingly,” ASIC’s answer said.

“ASIC has in place a number of controls to reduce the likelihood of incorrect allocation of costs to sub-sectors. The controls include a thorough reconciliation process for time allocated across different sub-sectors, an assessment of case allocations to respective sub-sectors, a reconciliation of ASIC’s overall expenditure, a comprehensive analysis comparing budgeted costs to actual expenses across all sub-sectors and senior executive reviews of all key industry funding model inputs.”