The two major adviser associations have issued strong rebukes following ASIC’s release of its 2020/21 funding levy estimates for the financial advice sector.
The FPA says the regulator’s latest industry funding levy estimate for financial advisers reinforces its position that the current formula is not equitable or sustainable, “…and must be reviewed immediately before more financial planning practices are forced to close”.
A statement from the association says the levy for financial advisers has increased by more than 340 percent in the last four years “…and is on an unsustainable trajectory”.
CEO Dante De Gori says the estimate of $1,500 + $3,183 per adviser for the 2020/21 year represents a further increase of 31 percent from 2019/20.
The association notes the actual levy figure could be significantly higher, because last year’s levy was under-estimated by 54 percent (i.e. between the Cost Recovery Implementation Statement (CRIS) estimate and the final amount actually levied).
(See: Call for ASIC to Stop ‘Fee Gouging’ from Advisers and AFA Escalates Concerns on ‘Excessive’ ASIC Funding Levy Increase.)
De Gori says that in light of extended lockdowns across the nation, the FPA questions the validity and timing of the increase.
“The FPA strongly recommends that the ASIC industry levy be reviewed immediately to provide a more equitable and predictable annual levy, and for the year-on-year increases to better reflect the capacity of the financial planning profession.”
Fixing an unpredictable and aggressive levy
While the FPA acknowledges the need for an industry-funded regulatory model, it says that two major issues have become apparent since the levy was first applied in the 2017-2018 fiscal year.
Firstly, the levy amount each year has proven to be unpredictable, “…which makes it practically impossible for a financial planner to effectively budget for this business cost, particularly by a profession that is dominated by small and medium-sized businesses”.
Secondly, it says, the levy has been increasing at a “…dramatic rate that far surpasses the rate of revenue growth for most financial planning businesses, or increases to ASIC’s budget”.
…this issue is being compounded as the number of registered financial advisers in Australia …has continued to decline
It adds this issue is being compounded as the number of registered financial advisers in Australia, from whom the levy must be recovered, has continued to decline.
The association notes that as a first step in addressing what it characterises as dramatic levy increases, the Government should urgently and immediately undertake a review of the ASIC industry levy.
A very poor litigation funding investment
Meanwhile, the AFA says it is disturbed to see a further substantial increase in the ASIC funding levy.
Acting CEO and General Manager, Policy and Professionalism, Phil Anderson, says in a statement the bottom line is that the ASIC levy for advisers has effectively become a very poor investment in a litigation funding scheme.
He states that as predominantly small business operators, advisers are being forced to invest a large amount of money into litigation against large institutions, many of whom are no longer even in the financial advice sector.
“There is no access to any upside for advisers on this investment, and a complete lack of visibility on what they are investing in and how those investments are performing.”
…the CRIS may underestimate the final cost per adviser…
Like the FPA, the AFA says it is also concerned the CRIS may underestimate the final cost per adviser because it is based upon 21,308 advisers, when adviser numbers were actually well under 20,000 by 30 June 2021.
The AFA is calling on the Government to remove the litigation funding element from the levy for financial advisers, or alternatively give them the benefit of any penalties that might be generated and substantially better visibility of what they have invested in.
A statement from ASIC explains that final industry levies will be published in December 2021 and invoiced in January 2022. Feedback on the draft CRIS can be submitted until 13 August 2021. Click here for further details.
Dante has made a statement that reflects the level of mismanagement he has applied from day one.
He backs a totally flawed model that ASIC wields with impunity and has not done what he should have been doing from 2015 when he was given the job, which is to question and demand proper analysis and accountability from the Government and the Regulators.
He and the FPA have shown little true leadership, especially around Risk Advice, of which they have never understood, yet pushed policy that has been detrimental to all Australians.
Dante has resigned and I suppose we will not know the full truth, though good ridance and let us hope that his replacement has the capacity to listen and more importantly know the difference between truth and what is best for all participants, rather than the past mish mash of contradiction and vested interest policy that was and still is, pushed by self interest lobbyists that infiltrate every part of our Government and Business sectors.
Make everyone as accountable as Advisers are and we would see a 90% reduction in Lobbying and the Legal Industry would be decimated if they could no longer hide behind the wall of jargon and legalize that protects them.
A flawed model that is the current ASIC funding levy, is why the Industry is being pulled from pillar to post.
One dollar is too much to pay for a system that has not created what was stated would be the end result of all the Regulatory changes.
The levy is such a good idea. Maybe they should expand it – put a levy on solicitors to fund the courts and on accountants to fund the tax office.
This government has lost the plot, they are very aggressive to us – if only we all lived in a marginal seat then there would be no problem
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