Speaking to ifa, Interprac national compliance manager Michael Butler said the proposed ASIC user-pays funding model will be the “trigger point” that may drive many financial advice businesses and accountants out of the industry.
Earlier this month, the government released a proposals paper for the new funding model, which shows the advice sector will be levied $24 million to refund ASIC, or $960 per financial adviser.
This new levy will be in addition to costs associated with transitioning to the new education standards, re-registering with the Tax Practitioners Board and, ultimately, funding an education standards setting body on an ongoing basis.
Many firms will also experience a drop in revenue thanks to the Life Insurance Framework bill, Mr Butler said.
“We don’t disagree (with LIF), but the problem is that this is all coming at the same time,” he said.
“The trigger point is the ASIC industry funding model. The licensees cannot afford to absorb that cost, so it’s going to be paid directly by the advisers.”
Mr Butler also expects that many accountants, who secured a limited licence this year, will reconsider whether it is worth providing SMSF advice.
“Their primary business is accounting. When does it become all too expensive for the accountant to continue paying these added costs?” he said.
“They’ve come across [to advice] and all of a sudden they’re now being hit with all of these cost increases and it’s going to be difficult for them to cover these costs.”
Mr Butler further predicts the cost of advice to rise, which will lead to more unadvised Australians.
“The cost of advice has to go up because of the imposts. There just won’t be enough people around to be in that mass market. The high net worth people will continue to be serviced, but the people who really need advice – the mass market – are going to fall into the clutches of robo-advice,” he said.
“Particularly, if the institutions do pull out of the distribution space, and I believe that they will, it is going to further exacerbate the number of people not receiving advice.”
I think the comments from M Butler have merit. There are a lot of accountants and mortgage brokers who are also qualified as advisers purely to take over other people’s work and take the income. For them another $1,000 per year will be the straw that breaks the camels back.
True, most dealer groups will not be able to carry the cost as dealer groups are not the cash cows the government and regulators seem to think they are.
But if your business cannot absorb $960 pa, then why are you in business? As for accountants, unless they are full AR’s the cost to them will be less, and once again the same applies as above.
If $960 per adviser is a key ‘tipping point’ for some licensees, isn’t their planning business already essentially dead in the water? Yes, I’m utterly irritated with ASIC, Labor and Industry Funds too guys, but I can’t help thinking that ASIC’s user-pay model, along with higher education standards, would be a relatively small hurdle for positive, energetic practices capable of demonstrating value to clients. In the scheme of things, this isn’t something to worry about.
Rick, you’re right. Those who are capable and committed to the industry will adapt and it will be business as usual. I can still understand the frustrations of many though, particularly about the $960 per adviser. The industry is getting pretty sick of being the scapegoat each and every time especially when there are some glaringly obvious fixes available that are ignored as they don’t meet the interests of some parties.
There are still however far too many advisers stuck in the past with old, archaic product flogging business models.
ASIC were found to be asleep at the wheel, rather than fix their poor practices , they instead have joined the chorus of blaming the most vulnerable, ” The Adviser” we should not expect anything else.
“the mass market are going to fall into the clutches of robo advice”. Actually the mass market are going to fall into the clutches of direct product sales generally. (Roboadvice is just a fancy marketing term for web based direct product sales. It is not real advice at all)
ASIC’s primary objective is to destroy the planning industry.
ASIC’s lack of action in enforcing their own regulations on providers, coys and wayward planners in the past have got us into this present disaster. They now believe endless enquiries and layers of regulation will prevent future mishaps.
Perhaps if they had been responsive to industry concerns about a Townsville based entity we would have avoided the need for FOFA and the associated billions now wasted on regulation.
The end result is less people receiving advice at a time when the need for advice could not be greater.
All this coming through at once would be a seriously rude awakening to any Accountants coming across to the licensing regime thinking planning was easy.