The corporate regulator has attributed an estimated 38 per cent increase in the adviser funding levy to 12 key focus areas, including the restructuring of the sector in the wake of the big banks’ exit, the banning of non-compliant advisers and the implementation of royal commission reforms.
ASIC’s 2019/20 Cost Recovery Implementation Statement (CRIS) provides an explanation of the activities that led to an estimated $40 million retail advice bill.
Also featuring in the list of focus areas is consumer testing of more appropriate labels for general advice, and an examination into the “demand and supply of advice’ to determine the extent of unmet advice needs.
Several projects that are currently suspended as part of ASIC’s response to the COVID-19 pandemic feature in the list of focus areas, including concurrent reviews into ending grandfathered commissions and life insurance commissions.
Further down the list ASIC reveal that enhancements to the Financial Advisers Register increased the funding bill, as well as the publication of an infographic of SMSF ‘red flags’, “for consumers considering whether to establish an SMSF, so they can make informed decisions”.
The budgeted costs, which are levied against ‘personal advice’ licensees on a per-adviser basis and generally paid for by advisers, are broken down into surveillance ($7.5m), enforcement ($12.3m) and financial capability ($1.2m). After other regulatory activities (eg. industry engagement, education), indirect costs (IT support, operations) and expenses the total estimated cost recovery comes to $40.2m.
As it stands the bill would be spread across 3,051 licensees and 22,652 advisers, totalling $1,571 per adviser.
In a statement released last week, the Financial Planning Association urged the regulator reconsider the budgeted levy given the struggles of advisers during the pandemic, and the likely event of Australia’s first recession in 29 years.
“Financial planners were hit with a 22 per cent increase in 2017-18,” said FPA chief executive Dante De Gori. “Now ASIC estimates the levy will increase by 38 per cent for 2019-20.”
“Financial planners themselves are already under tremendous pressure to meet new education requirements, await critical outcomes on the FASEA extension from an unpredictable parliament and overhaul their business models to meet regulatory requirements,” De Gori continued. “As small businesses, financial planning practices also face the challenges that COVID-19 has created for the wider SME sector. ASIC’s fee hike does nothing to support them or their clients during this difficult time.”
De Gori warns that the 38 per cent increase may actually be conservative as ASIC has, in years past, eventually charged more than they forecasted. In December 2019 ASIC’s ‘actual levies’ of $1,142 per adviser were considerably higher than the $907 that was forecasted, which the regulator attributed to ““higher regulatory costs than expected… including on enforcement action”.
