ASIC levy hike a ‘step in the wrong direction’, industry warns

Last week, Financial Services Minister Stephen Jones announced that the freeze implemented on the Australian Securities and Investments Commission (ASIC) levy charged to financial advisers, which was implemented by the previous government, will not be extended, despite industry voices advocating for its continuation.

A day later, the corporate regulator, in its draft Cost Recovery Implementation Statement, revealed that the levy would nearly triple compared to the amount charged during the previous government’s levy freeze.

While industry reactions have varied from extreme concern to bitter disappointment, the general sentiment expressed by the industry in response to the announcement is that it represents a terrible step in the wrong direction.

Namely, Lifespan Financial Planning chief executive Eugene Ardino told ifa that the news is “extremely disappointing”.

“The freeze should have remained in place until a fairer approach could be formulated, as the approach being used before the freeze saw this levy almost triple since its inception, which is just not sustainable,” Mr Ardino argued.

“If the government is serious about making advice more affordable and attracting more new entrants, then this announcement is a terrible step in the wrong direction.”

Mr Ardino encouraged other advisers to contact their local members or Minister Jones to make their thoughts on the matter clear.

Philippa Hunt, director at Artemis Financial Services, told ifa that advisers are still very much in need of the “temporary and targeted relief” that Mr Frydenberg highlighted at the beginning of the freeze.

“There are fewer advisers left, now [the] increased levies will have an impact because the cost was spread over more advisers years ago, so it cost less at the time,” Ms Hunt told ifa.

As such, she said the added brunt that advisers will have to bear will trickle down to clients, potentially halting efforts to improve the affordability of financial advice.

“Fewer advisers will bear the cost, and of course it will be passed onto clients. So, the cost of advice again will rise,” she continued.

Moreover, Ms Hunt projected that the ongoing exodus of advisers, which has been a defining feature of the industry in recent years, will further exacerbate the situation.

“There does not appear to be a formula used by ASIC to determine the cost.”

“If more advisers leave, then the cost will be spread over the few remaining, and again, the clients will pay more to cover the cost.”

Ms Hunt did, however, express scepticism regarding the original objective behind the coalition government’s freeze and speculated that it may have been motivated by the impending federal election.

“When ASIC increased the fee last time, their excuse was that [the] adviser levy was used to fund the ASIC High Court case against Westpac bank.

“When advisers screamed about the huge sudden rise and what it was used for, Frydenberg cut it back because of the looming federal election and labelled it a ‘pandemic freeze’,” she said.

Meanwhile, researcher and speaker Dr Katherine Hunt said that while the regulator needed to be funded, clients will likely endure the financial burden.

“The ASIC levy is something that makes theoretical sense — the regulator needs to be funded somehow, and a ‘user-pays’ system is common in various sectors,” Dr Hunt said to ifa.

“However, the logistics of financial advice mean that any fixed costs will ultimately be paid by clients.

“Hence, if our goal is to increase access to affordable financial advice, this increase in the ASIC levy is creating some strong headwinds for achieving that goal.”