The corporate regulator has revealed that feedback on the industry funding model – in particular the annual adviser levy – will be sent directly to Treasury and inform the government in its upcoming review of the model in 2022.
In response to a question taken on notice at a recent Parliamentary Joint Committee hearing, whereby senator Deborah O’Neill asked to see “modelling of alternatives to the current structure” ASIC has worked on, the regulator confirmed it’s engaging with Treasury on the model, including “feedback we received from industry about the IFM through stakeholder engagement”.
ASIC most recently worked with Treasury in structuring a targeted levy relief plan for advisers that included a cap on levies for the next two years at their FY18/19 level of $1,142 per adviser, which should see advisers each save around $4,000 in levies over the period.
The measure was seen as an acknowledgement that the industry funding model, which has seen levies triple in four years, is flawed, with its design resulting in a cost lag whereby current advisers who cause the least monitoring and enforcement burden end up paying for the regulatory oversight of those that have left the industry after running up the regulatory bill.
A feature of this cost lag has been the prevalence of smaller, independant advisers paying for the misconduct of institutional advice providers that have left the market.
While the levy relief was welcome news, especially during the Covid recovery, Treasurer Josh Frydenberg admitted that it would come with a catch – the introduction of a Single Disciplinary Body, which passed last week and will increase the regulatory costs as of January, and a Compensation Scheme of Last Resort, which advisers will help fund.
While the costs have piled up for advisers, regulators and policymakers are sending signals that their intent is to stem the flow.
Aside from the temporary levy reprieve, the funding model review is an acknowledgement that its settings are off. In August financial services minister Jane Hume said she wanted to remove red tape and “improve regulatory alignment” for advisers.
“In the many conversations I have had with advisers, the cost pressure from the ASIC levies has been one of the issues that has worried them most,” she said.
ASIC, under new chair Joe Longo and mindful of the need to support a shrinking advice industry that has taken on newfound prominence in the pandemic, also announced in its August corporate plan a new internal unit to monitor how it operates, with a focus on minimising regulatory costs for businesses.”
Add to ASIC’s new direction a promise to pass on adviser feedback about the levy to Treasury, which is likely to restructure the industry funding model as part of its review.