Compliance costing $100,000 to $500,000 a year
Financial planning and accounting firms are having to spend between $100,000 and $500,000 a year on internal compliance staff to meet the complexities of Australia’s financial services legislative regime.
A joint submission from the major accounting and financial planning groups has told the Australian Law Reform Commission (ALRC) that they agree that the “existing legislative framework for corporations and financial services regulation is unnecessarily complex, fails to communicative fundamental norms and hinders compliance”.
The submission, signed off by the Financial Advice Association of Australia, the SMSF Association, CPA Australia, Chartered Accountants ANZ and the Institute of Public Accountants (IPA) has urged prompt action to address the issues.
“Without being able to locate, understand and apply relevant provisions with certainty, participants are at risk of failing to comply with their obligations. As a result, participants are investing heavily in their compliance functions, with many spending between $100,000 and $500,000 each year on internal compliance staff alone,” it said.
“The complexity of the existing legislative framework is also arguably adding to the cost to regulate the sector, even with declining financial adviser numbers over the past five years. This is evidenced by increasing levy charges to retail financial advice sector each year under the ASIC Industry Funding Model since implementation.
“Given the Government is seeking to ensure Australians have access to reliable and affordable advice3, reform is crucial to address the unnecessary compliance costs being incurred by financial services participants, which in turn is driving up the cost of accessing financial advice.”
The submission said the joint associations strongly supported the ALRC’s proposals to investigate how to simplify (by reframing and restructuring) the financial services law.
“Simplification will reduce compliance costs, and in turn support the objective of improving the access of quality, affordable financial advice,” it said.
“The Joint Associations also support that these recommendations and proposals consider how existing legislation can be structured and framed to facilitate future reforms, including those arising out of the Quality of Advice Review.”
“We believe this review provides an immediate opportunity for the Government to consider how the recommendations and proposals can be incorporated into its roadmap for financial advice reform. The need for reform is urgent. We encourage the ALRC to convey to government the clear wider economic benefits, and therefore urgency, of simplifying the financial services laws.
“It is our expectation that a simplified financial services regulatory environment will lead to a more efficient and cost-effective financial services industry. It is reasonable to assume that retirement savings for many will be higher because the cost savings from lower compliance costs will flow through to increased superannuation and investment balances.”
Canberra Pollies, Regulators and Bureaucrats take a bow for the total utter shambolic disaster you have created in Financial Advice over last 20 years.
Moronic Canberra :-/ never listen to real advisers.
I estimated several years ago that we were spending around $250k p.a. on a two adviser practice, at the time just under 25% of our gross revenue. We’ve since managed to grow revenue strongly whilst holding the compliance costs stable. This is still hellishly expensive any way you cut it. Compliance costs will never be eliminated of course but it could easily cut by 60% or more.
It is soooo simple yet the Muppets in treasury and other parts of the Canberra psycho bubble either can’t see it clearly or simply don’t want to due to the influence of the banks and insurers and especially the union funds. Too many of their snouts in trough and they don’t want to give up their prime place at the trough.
Independently minded advisers will continue to get shoved aside – there’s no interest like self interest, just ask the union funds.
Great post, but re point 3 – needs to be 2/3rds majority (to avoid grandstanding from extremeist independents) and must be current financial planners or those with 20+ yrs experience. Failed advisers, with less than a few years experience, have done a lot of damage within ASIC and the associations. Jealousy is a curse
Yes of course Jimmy I agree. The dodgy advisers will find that the board is much faster to react and potentially has bigger teeth than the current regulatory shemozzle.
We would have no Dixon no Storm as actions would be taken much sooner before they become the size they became before the bubble bursts.
Clients will be better protected, advice can be offered at cheaper rates.
What’s the problem with this solution?
The union funds either get cut out or have to employ professional advisers, not back packers as they are currently planning under the QAR stitch up.
This is 100% correct. At our firm it is approximately $140,000 pa, before we even pay a dollar in salaries. The only way forward is to eliminate Annual Fee Renewal Forms, ongoing red tape that does not exist in any other nation on earth, in order to cover these costs.
Unfortunately with such big money involved in compliance now, a whole “compliance industry” has sprung up to feed off it. Regulatory bureaucrats, licensee compliance departments, compliance training companies, compliance lawyers, paraplanning, and half the functionality of most FP software systems, are providing a “service” that shouldn’t be necessary.
The providers of these “services” have become so entrenched and reliant on the compliance dollar, they will fight tooth and nail to justify the “need for greater compliance”.
And to think Michelle Levy spent all those months developing her recommendations and missed such low-hanging fruit that would reduce the cost of advice and increase the supply.
Makes you think the recommendations had already been written for her!!