ASIC has defended the 30 per cent projected adviser levy increase, with acting senior executive leader for financial advisers Leah Sciacca detailing some of the enforcement, surveillance and project work behind the costings at the Professional Planner Best Practice Forum Tuesday afternoon.
The projected increase in the levy was top of the agenda for the session, with Sciacca saying the regulator “recognises, obviously” that the $3,138 estimate of the graduated component is an increase on the actual $2,426 charged last year.
Sciacca – herself is a former financial adviser who has been at ASIC for 11 years but only in her current role “for a few weeks” – said she could understand, “from an adviser’s perspective” how they would feel seeing the cost increase, “particularly if they feel as though there’s no regulatory efforts directed specifically towards them”.
The first thing to be clear on, she explained, is that the funding model is set by the federal government, not the corporate regulator.
“It’s intended to ensure that ASIC’s regulatory activities are met by those creating the need for the regulation rather than the taxpayer,” she said.
In terms of costs, the ongoing “larger focus” on the sector in the wake of the Hayne royal commission has increased activity in three areas, Sciacca explained; enforcement, surveillance and a handful of special projects including its Unmet Advice Needs study, the LIF reforms review and the monitoring of the industry’s transition away from grandfathered commissions.
“I hope that gives you an idea of some of the work that we’re doing that may have contributed to those increased costs.”
Sciacca said ASIC is focussed on “efficient and effective” enforcement, “particularly those that have a high deterrence value and those responding to egregious misconduct”.
“We don’t focus on one class or size of licensee to the exclusion of others,” she continued. “Rather, when determining whether we’re going to formally investigate matters, we consider other factors such as the strategic significance of the matter, the seriousness of the alleged misconduct, the extent of harm loss… and we also consider the benefits of pursuing the misconduct.”
On surveillance, Sciacca said ASIC continues to monitor advice compliance across financial advice firms, calling it “one of the key functions” of the financial advice team.
“That includes banning non-compliant advisers or taking regulatory action where appropriate,” she added.
Salt in the wound
News of the projected increase in ASIC’s advice funding levy late last week was met with frustration and concern from the advice community, with Financial Planning Association chief executive Dante De Gori warning that it could lead to more advice practices shutting their doors.
Licensees of retail advisers will be charged a $1500 flat fee plus a graduated component that has risen steeply from the $934 charged when the industry funding model was first introduced in FY17/18 to the projected $3,138 today.
The huge increase comes as the industry wrestles with the loss of 30 per cent of its workforce, increasingly tighter regulatory controls and the myriad effects of the pandemic.
“Considering the state of the nation at the moment with millions unable to work and some businesses struggling to keep staff employed, the latest increase could have been better considered in both application and timing,” De Gori commented.
Acting chief executive of the Association of Financial Advisers Phil Anderson noted that the actual levy could end up being higher than estimated given ASIC spread the total cost recovery amount of $71.3 million over 21,308 advisers, when there are only around 19,000 advisers on its registry.
ASIC has a history of misjudging the actual cost of the levy, with De Gori saying it’s “practically impossible” for advisers to budget accordingly.
Sciacca said the enforcement costs – by far the largest portion of the budget at an estimated $31.3 million – are “difficult to predict” at the start of the year.
“We use the best information we have available to it to us, but there is always likely to be a difference.”