Elders general manager Tony Beaven

Advisers will need to pay almost $1000 each as part of ASIC’s new industry funding model, with a representative for the regulator confirming invoices will be sent to licensees on Thursday.

The levy, part of an arrangement that became law on July, 2017, will require typical licensees to pay a minimum of $1500, plus $934 per adviser.

A spokesperson for the regulator said invoices for the levy should be sent “in the next few days”.

Licensees are believed to be largely passing on the cost of the levy to advisers, although some have facilitated payment plans to soften the burden. Tony Beaven, general manager of licensee Elders, says it took a proactive approach.

“We were aware of the ASIC levy right from the start and contacted advisers back in 2017,” Beaven says. “We then put measures in place to mitigate the anxiety and financial discomfort for advisers.”

Beaven explains that 67 advisers under the Elders licence were put on a payment plan to cover the expected costs, which will deflect any bill shock.

“It’s all sorted now,” he says. “The costs are taken care of.”

Peter Ornsby, chief executive of RI Advice Group, says the plan is to wait until more information has been received from ASIC and then work with advisers to chart the way forward.

“We’ll be catching up with our PAC (proprietors advisory council) on the 20th and 21st of February and that’s going to be high on the agenda,” Ornsby says. “We’ve always had a very strong consultation with advisers and proprietors on these issues. As more information’s coming through the pipeline, we’ll actually sit down with them and work it out.”

He points out that it will be incumbent upon licensees to keep advisers informed about the process, as mandated by ASIC.

“What we do is send our advisory council an information pack they can pre-read so we’re all completely informed and can have a robust discussion,” he notes.

Entity metrics

Financial services industry levies became law after a recommendation from the 2014 Murray Financial System Inquiry that government recover the costs of regulatory activities “directly from industry participants through fees and levies calibrated to reflect the cost of regulating different industry sectors”.

Jonathan Steffanoni, principal consultant at QMV, says the transition from using general tax revenue to pay for financial regulation to using industry funding has an “underlying policy position” that the industry itself should cover the costs, “not everyday taxpayers”.

This year, 2019, marks the first in which the regulator will recover most of its costs from the regulated industries, including the insurance, market infrastructure, corporate, investment management and superannuation sectors. The current charge will account for the 2017-18 financial year.

Between July and September last year, all regulated entities were asked to visit an ASIC portal and validate their business metrics, which were then used to calculate the levy amount.

The final costs were published in December, with an ultimate recovery cost of $28.26 million spread across licensed providers.

Licensees providing less than Tier 1 financial advice, including those that provide general advice or basic product advice – or wholesale advice providers – are charged separately from those that provide “personal advice to retail clients on relevant financial products”.

There has been some confusion among licensees and advisers about whether the levy would be charged on a pro-rata basis. However, the government’s register of legislation – which charters the individuals being levied – states that the primary “entity metric” is the number of relevant providers who are registered “at the end of the financial year”.

A complex truth

The Murray Inquiry report noted that the benefits of industry funding were expected to exceed the costs.

Steffanoni explains that these benefits may come from an awareness that better compliance from advisers and licensees will actively reduce the cost burden they share.

“There is arguably an incentive for regulated institutions to operate and behave better,” Steffanoni notes, “as this may result in lower costs, lower levies, and better commercial outcomes.”

The truth, he continues, is “probably more complex”, as the link between the activities of regulated institutions and regulatory costs is “indirect”.

There are other upsides, Steffanoni reckons, including greater transparency of regulation costs and less risk of underfunding for ASIC. For advisers, however, these factors mask the real issue.

“The biggest problem lies in the fact that regulated institutions have only limited influence over costs associated with their regulation,” Steffanoni says.

Tahn Sharpe is a Sydney-based financial services journalist with a background in financial planning. He writes on advice, superannuation, investment, banking and insurance issues, is a certified SMSF Adviser and holds an Advanced Diploma of Financial Planning.
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