Repeating ASIC levy mistakes and impact on advisers must be avoided
The big mistakes which surrounded the industry funding model for the Australian Securities and Investments Commission (ASIC), linking the levy calculation to the number of financial advisers, should not be repeated with respect to the Compensation Scheme of Last Resort (CSLR).
There are simply no longer enough financial advisers still on the Financial Adviser register to fund the ASIC levy as originally devised and the proposed funding model for the CSLR is equally problematic.
The Stockbrokers and Investments Advisers Association (SIAA) has used its submission to the Senate Committee review of the CSLR legislation to strongly argue that financial advisers alone should not be made to carry the financial burden of the CSLR and that no decisions should be taken until the actual costs are known.
“One of the biggest flaws in the ASIC Industry Funding Model is that levies imposed on the financial advice sub-sector are calculated according to the number of financial advisers on the financial adviser register (FAR),” the SIAA said.
“This model may work well when the number of financial advisers on the FAR and the amounts to be levied remain stable. However, the decline in the number of financial advisers has been precipitous. Adviser numbers on the FAR have fallen from 25, 484 in 2017 to 15,908 as at 6 October, 2022,” it said.
“A reduction in adviser numbers has resulted in the levy amount per adviser increasing each year in a manner that industry considers to be unsustainable and which has resulted in the former government freezing the levy amount for the 2020-21 and 2021-22 financial years and a current consultation to review the levy framework,” the submission said.
“We consider that any levy model must take into account the possibility of a continued fall in financial adviser numbers, as otherwise the current framework could result in unsustainable levies,” the submission said.
The SIAA said that, on this basis, the legislation underpinning the CSLR should not be finalised until the Treasury completes its review of the ASIC industry funding model.
“We strongly recommend that the bill not be passed until we have been able to provide feedback on the regulations as the ‘devil is very much in the detail’ when it comes to the way the levies are determined,” it said. “We also consider that consultation on the effectiveness of PI insurance needs to take place before the CSLR legislation is passed, given its importance in clarifying the source of unpaid determinations and reduction of risk to consumers.”
Of course MIS / Institutions that have twice the value of outstanding AFCA claims compared to Advisers, have paid Govt enough bribes / donations to avoid CSLR.
Our system is totally broken.
And Govt costs / levies on Advisers for CSLR will be triple what is actually outstanding in AFCA claims.
Govt bureaucratic madness and red tape costs galore.
The whole system is flawed. Why should advisers be paying a levy to cover the costs/failings of large institutions? Its a joke.
This has always been a “pass the buck” legislation to try and fix what the” big banks” started and conveniently walked away from.
With half the adviser base left it is impossible to use the same previous structure. Government body ! Government pays for it.