The corporate regulator has blamed higher costs and the Hayne royal commission on a 26 per cent increase on estimates for the 2018-19 individual adviser levy.
ASIC’s Industry funding: summary of 2018-19 actual levies, published in December 2019, detailed the charge to licensees for regulating advisers who provide personal and retail advice at $1,142 per adviser, as opposed to the $907 per adviser estimate that was provided in ASIC’s June Cost Recovery Implementation Statement (CRIS).
Both charges also include an additional minimum $1,500 levy, which remains unchanged.
The total cost recovery amount for personal and retail advisers – the sector that covers most of the advice industry – ballooned from an estimated $25.031 million to a final figure of $33.028 million.
Speaking to Professional Planner, an ASIC representative attributed the increase to “higher regulatory costs than expected… including on enforcement action”.
“The variance between the forecast and actual levies for financial advisers… is mainly due to an increased focus on the financial advice sector as a result of the recommendations of the Financial Services Royal Commission,” the spokesperson continued.
ASIC was chastised by commissioner Hayne during the royal commission proceedings for using the question ‘how can this be resolved by agreement?’ as a starting point in resolving misconduct, instead of asking whether a court should determine the consequences of any contravention.
The public admonishment saw the corporate watchdog embrace its ‘why not litigate?’ policy with gusto – an activity which has trickled down into the adviser levy fees.
Always a risk
The higher levy comes as a blow for the advice industry after the $907 (per adviser) estimate looked set to deliver a slight discount to the $934 charged in 2017-18.
The 26 per cent hike is the first significant variance between the estimated and actual cost in the subsector since the government implemented its industry funding arrangement in 2017.
According to the regulator, the estimates are there to help businesses budget but are subject to change.
“The ASIC industry funding model was designed so that industry levies are set at the end of the year, after ASIC’s regulatory costs are known. This means there is always a risk that forecast levies will differ from actual levies,” the spokesperson said.
“Levies will also vary over time, as ASIC’s focus areas change based on the threats and harms in the market place.”
Accountants operating under limited licence will still be liable for the full levy, despite Chartered Accountants Australia and New Zealand (CA ANZ) lobbying for an exemption last year.
As reported by Professional Planner, most licensees intend to pass on the cost of the levy to their adviser representatives, though some have facilitated payment plans to ease the burden.
According to William Johns, CEO and founder of Health and Finance Integrated in Melbourne, ASIC should have been more proactive in notifying advisers of such a dramatic increase.
“I can tell you that without consultation and without informing the industry prior, ASIC is only increasing the burden of giving advice and isolating the ability of Australians to receive it,” he says.
Johns believes a drop in the number of advisers on ASIC’s Financial Adviser Register is a major factor in the cost increase per head. “It’s actually reducing the pool of advisers that can pay the cost,” he continues.
According to the CRIS, the budgeted levy was based on 2985 AFS licensees with 22,769 advisers, while the actual levy was based on 3,051 licensees. Final adviser numbers were not provided in the summary.
Johns notes that the well-documented exodus of thousands of advisers from the industry, especially from the banks, will likely also lead to a rise in cost for professional indemnity insurance.
“The cost for advisers is just becoming unbearable,” he laments.
Johns was recently appointed as a board member of the Financial Planning Association, but stresses his comments are personal views and not that of the association.