‘Unfair’: ASIC levy rises $2,238 per AR over 5 years
The Financial Advice Association of Australia says the new ASIC levy is “deeply unfair” and wants the Government freeze reinstated pending amendments to the Australian Securities and Investments Commission industry funding model.
The FAAA also wants any ASIC activity generated by bank financial advice excised from the levy amount being charged to financial advice licensees.
This comes against the reality that financial advice licensees would have paid an ASIC levy of $2,971 and then $3,021 per authorised representative in the absence of the Government’s levy freeze and are now having to front up to $3,217.
In raw dollar terms the ASIC levy has increased by $2,238 since 2017-18 and the Government’s levy freeze over the past two years saved licensees around $3,000 per AR.
ASIC released its latest Cost Recovery Implementation Statement late on Wednesday barely 24 hours after the Government released Treasury’s review of the ASIC Industry Funding Model which recommended a range of changes.
FAAA chief executive, Sarah Abood acknowledged that those recommended changes might make future charging fairer, but said there were two major problems:
“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. This breaches one of the major principles of the IFM, that those who create the need for regulation should bear the primary cost. The moral hazard involved in this is of great concern and a fundamental flaw in the design, that must be rectified. It is unsustainable to have a model in which the good actors in our sector disproportionately bear the costs of the misbehaviour and risk taking of the bad actors, including those who are no longer operating or who are unlicensed.”
“Even more concerning is the complete lack of clarity or transparency on what happens to the proceeds of enforcement activities. ASIC has estimated expenditure of $18.2m in 2022/23 on enforcement activity in our sector, yet recoveries are only $2.1m. 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.
“For example, ASIC was successful in court against Westpac in April 2022, with $113 million in penalties being awarded in this single case (which included advice related matters). What has happened to those penalties? Have they simply gone into consolidated revenue? If that is in fact the case – that financial advisers are funding ASIC action against these participants, and yet the government is keeping all the proceeds – then this breaches really fundamental principles of fairness and equity.
“The second key problem is that even those suggestions in the review that have been accepted are not reflected this year’s Cost Recovery Implementation Statement (CRIS). It’s deeply unfair to proceed to charge advisers using a model that is already acknowledged to need reform.
“When the levy was originally frozen, at $1,142 per adviser, the profession had substantially more participants than it does now. The increase for this financial year, to an estimated $3,217 per adviser, almost triples the costs. 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.”
Great to see the FAAA stand up for the advice profession on this issue. Well done Sarah. The increase in this levy illustrates extreme hyper inflation. I just don’t understand how ASIC could go from spending $25m on financial advice in 2017/18 to $55m in 2022/23 when adviser numbers have fallen substantially and professional standards have increased significantly. The table above shows how the hard fought for relief over the last two years of nearly $2,000 per adviser, must have cost the Government over $60m. We should be thankful for that, however we must demand that it continue. One important way to solve this would be a large reduction in expenditure by ASIC. The most unbelievable thing is the contrast between personal advice to retail clients ($3,217 per adviser) and wholesale only client advisers ($18 per licensee). The wholesale only space is a great place to hide from regulation (consumer protection) and then it costs virtually nothing. What a joke.
A bit too little too late from the FAAA/AFA/FPA, I wouldn’t be congratulating them. This issue has been known for a long time, so they should have been raising hell and going into bat for their members. They didn’t, they simply used they usual approach of playing nice and agreeing with every bad decision and bad piece of legislation/regulation that hurt their members. I will be very interested to see how many join the FAAA from the AFA/FPA. Their membership is simply a fee for no service / result.
Nice effort Sarah…one little question, exactly how is a Risk Adviser to pass on the costs to clients? Could we simply call the insurer and ask them to slap another 1% on renewal revenue. Risk needs it own Association and Voice. I thought CALI would be a good thing but unfortunately I mistakenly thought they would actually care about Advisers.
CALI is an FSC offshoot of the insurers who colluded to create LIF, and got Kelly O’Dwyer to legislate it. They are the enemy of insurance advisers. In time they will realise they have shot themselves in the foot and destroyed the personal insurance industry.
The insurer’s LIF dividend of reduced commissions and increased direct sales will never offset the massive loss of advised product business. Consumers significantly underinsure themselves without professional advice to guide them.
Well Matt, it’s like this, no one cares about us risk advisers. To give some credit where it is due, the AFA (FPA?) engaged with the former Coalition government to hold the ASIC levy down during COVID. A one-off fix with an election looming. But, to quote Bill Hayden, “a drovers dog could have negotiated that little matter”: Morrison and Hume were desperate. A proposed fee increase was held back, but I doubt there was any challenge to the concept of an adviser levy in principle.
But I can find no evidence that the AFA, FPA or the FAAAA were involved in the recent Treasury review of the levy. There might have been the odd wordy submission but I’ll bet there were NO FEET UNDER THE TABLE as stakeholders, aggressively banging away at the absolute stupidity of this levy, which now appears will continue increasing every year, just because ASIC says so. The Government, and through them the voters and consumers, have lost control of ASIC. It’s not there for our benefit, any of us! The only voice of common sense in this current debate is Andrew Bragg
The lack of equity and fairness in the ASIC levy has been obvious now for some 3 to 4 years. It should never have got up without ensuring that a significant percentage of the contributions to Consolidated Revenue from successful legal action were put into a “pool” from which ASIC could engage in even more “heads on poles” adviser-hunting and “look-back” exercises
The real kick in the guts comes when you read ASICs spiel as to what the proceeds of the levy will be put to, DDO for example, is for product manufacturers matter, not advisers. We pay NOW to be on the FAR.
I’ve fired off a indignant lettered to my local Labor MHR but I don’t hold any hope – he’ll just toe the party line.
Why are advisers paying for the wrongs of the institutions? Unbelievable that the individuals are hit once again because of government incompetence and institutional greed!
You can’t be that naive that it is only institutions, some of the rubbish I have seen come out of non institutional advisers is frightening at best and dangerous at worst. Just the institutions had more scrutiny and deep pockets
What about the graduated fee that gets applied to securities dealers?
For FY19/20 the fee was 3c per $10,000 of transactions
FY20/21 the fee jumped to 5c per $10,000 of transaction
FY21/22 the fee exploded to 15c per $10,000 of transactions
So what will the graduated fee be per $10,000 of transactions for FY22/23??? 20c??
This is paid on top of the rip off AR fees.
Name another sector that gets hit with these sort of annual levies?
No wonder people are leaving the sector.
The industry levy is nothing more than a govt approved scam.
Giving a blank cheque to a government body is a huge moral hazard as far as I am concerned. Not only that, its a double-tax. It’s like the government don’t recognise the millions of people who use financial advice/services, and believe they shouldn’t have to contribute anything as part of their PAYG to fund ASIC completely.
Maybe some advisers need to run for parliament.
I have been asked…but the particular party had only $5,000 to put forward as campaign funds…
When I helped a friend run he had $100,000 in campaign funds from various party sources.
…and you can bet someone somewhere is expecting a return on their financial contributions.