The financial services sector has welcomed the announcement of further funding for the Australian Securities and Investments Commission (ASIC) but has raised questions around the proposed user pays model and the affordability of advice.
The Financial Planning Association (FPA) called the Government’s move “a more sensible solution than a Royal Commission” while the Association of Financial Advisers (AFA) stated the funding would add to the momentum already in place to improve the quality of financial advice.
However, both groups were concerned that the proposed model for the financial services sector to pay for the operations of ASIC may restrict competition and increase the affordability of advice.
AFA, Chief Executive, Brad Fox said it was appropriate to recover ASIC’s regulatory costs from the sector but the details of how those funds were sourced were important.
“The benefits in financial, relationship and total wellbeing for those that receive financial advice are beginning to be understood by the community,” Fox said.
“So, the cost impacts of this model need to be considered in light of accessibility and affordability of financial advice, as well as upon competition in the market place between institutionally owned financial advice and advice provided by a local community small business financial adviser,” Fox added.
FPA, Chief Executive, Dante De Gori also raised questions around the funding model but suggested the Government consider a carve-out for small business operators in the financial services sector.
“The proposed user pays model provides in principle a sensible long term solution to the financial security of the regulator, however the FPA is keen to better understand the model and how it will ensure equity and fairness for small business operators. In particular, the funding model must not stifle competition or prohibit future entrants into the financial services industry,” De Gori said.
“The FPA has requested Government consider possible exemptions for small business operators similar to the model used by AUSTRAC, who is the regulator for anti-money laundering and counter terrorism legislation.”
The Financial Services Council (FSC) also supported the funding model but called for a swift implementation and greater exercising of the current financial services regulation and legislation.
FSC, Chief Executive, Sally Loane said the financial services industry was already prepared to fund ASIC based on the principle that the sectors which required regulation should also have to pay for it.
“We believe the package announced today should be swiftly implemented. After 15 reviews into financial services and little change to ASIC, we support action, not further reviews or inquiries,” Loane said, adding, “the strongest regulatory regime in the world will never be effective unless laws are enforced.”
Given one of the FSC’s members namely Comminsure were a big reason for a Royal Commission being called for it is no surprise that the FSC would agree to anything to avoid it. Members of the FSC will no doubt simply pass the costs of this onto the customer in some way or another.
So from a customers perspective a Royal Commission would be a better outcome.
If it were to include the LIF collusion between the FSC members and the AFA and FPA who are heavily funded by the FSC members resulting in a worse outcome for customers and independent advice then this would be a good thing too.
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