The corporate regulator has indicated another steep increase in the adviser levy is on the cards in its latest cost recovery implementation statement, which stakeholders believe could directly contribute to more advice businesses shutting down.
Licensees of retail advisers will be charged $1500 plus $3,138 per adviser according to ASIC’s estimates for the 2020/21 financial year, an approximate 30 per cent increase on the $2,426 per adviser charged in 2019/20.
The fee per adviser has increased from $1,142 in FY18/19 and $934 in FY17/18.
Association of Financial Advisers acting chief executive Phil Anderson says he is “extremely concerned” about the estimates.
“This seems to have been driven by a huge increase in enforcement costs,” he tells Professional Planner.
Financial Planning Association CEO Dante De Gori says the formula used to calculate the levy amount is “not equitable or sustainable and must be reviewed immediately before more financial planning practices are forced to shut their doors”.
“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 continues.
ASIC’s senior executive director for financial advisers, Leah Sciacci, will be appearing at Professional Planner‘s Best Practice Forum and taking questions from advisers on Tuesday 27 July.
Bills, bills, bills
Details of the estimates provided by ASIC show enforcement to be the most costly activity, with about $31.3 million worth of expenses to be picked up across the cost recovery and statutory levies.
Other cost burdens include governance, central strategy and legal ($7.8 million), supervision and surveillance ($8.5 million), and property and corporate services ($7.9 million).
IT support ($5.1 million), operations support ($3.5 million) and education ($1.5 million) were among the other significant costs.
Further risk and uncertainty
The AFA’s Anderson says the levy could actually end up being even higher than the estimate, which spreads a cost recovery amount of $71.3 million over 21,308 advisers.
There are currently around 19,000 registered advisers on ASIC’s registry.
The corporate regulator does have a history of underestimating the cost of the adviser levy.
ASIC predicted the levy per adviser would be $907 for the 2018-19 financial year, yet the eventual bill was $1,142 – a 26 per cent disparity. After estimating $1,571 for the 2019-20 financial year the final amount came to $2,426 – a miss by 35 per cent.
Last year De Gori said the annual ASIC levy amount is too unpredictable, “which makes it practically impossible for a financial planner to effectively budget for this business cost”.