Petition calls for restructure of ASIC levy

When the government announced that the freeze instituted by former treasurer Josh Frydenberg on the ASIC Supervisory Cost Recovery Levy would be lifted, it was clear there would be a jump in the amount advisers were required to pay.

The size of that increase was not expected, however, with the corporate regulator’s draft Cost Recovery Implementation Statement (CRIS) showing that the cost of regulating licensees that provide personal advice to retail clients was $55.5 million in 2022–23. This moved the levy from the frozen level of $1,142 per adviser to $3,217 per adviser, while the cost to licensees remained at the flat $1,500 fee.

The Australian Securities and Investments Commission (ASIC) then revised its overall cost statement reducing the amount required to regulate the sector by nearly $8 million to $47.6 million, with a subsequent $400 reduction for individual advisers. However, this new $2,818 has not been met with exuberance from the profession.

“We will continue to work with ASIC, Treasury, and the minister’s office to support and encourage further changes including the implementation of the improvements to the industry funding model that were recommended by Treasury in its recent review,” Financial Advice Association Australia (FAAA) chief executive Sarah Abood said at the time.

“Making financial advice more affordable for Australians starts with making financial planning more affordable to practice, and getting costs down for financial advisers remains a high priority for the FAAA.”

Despite this, speaking at the Association of Independently Owned Financial Professionals’ (AIOFP) Canberra Conference in December, Minister for Financial Services Stephen Jones emphasised that the ASIC levy is not currently a top priority for him, suggesting that it could be addressed at a later time.

“We’ve got an industry funding model right across the board, not just for financial advisers,” Mr Jones said.

“Is it perfect? No. Are there areas it might need to be polished up? Yes, there might be,” the minister said.

“Can we settle down on the stuff currently in front of the government?”

Putting more onus on licensees

A petition has since surfaced on the official website of the Australian Parliament – Petition EN5784 - Fairer outcomes for the ASIC Supervisory Cost Recovery Levy – asking that a portion of the levy paid by licensees be increased.

The petition comes as invoices for the ASIC levy begin to land in advisers’ inboxes.

“While fees for advisers are expected to increase by more than double, fees for Australian Financial Services Licensees (AFSLs) are set to remain at $1,500,” the petition said.

“We are concerned by the significant cost asymmetry that has emerged between individual financial advisers and AFSL holders.”

AFSL holders, it argued, are responsible for the conduct of the advisers that operate under their licences and “must ensure that the financial services their advisers are authorised to provide are delivered honestly, fairly and in accordance with law”.

“We submit that ASIC’s main regulatory focus (and therefore its costs) relate to AFSLs, rather than individual advisers,” it said.

“We therefore ask the House to request Minister Stephen Jones to by regulation increase the minimum amount payable by an AFSL from its current fixed amount of $1,500 before invoices for the levy are issued in early 2024 to ensure equitable outcomes for the financial advice sector.”

’Fix is misplaced’

According to Eugene Ardino, CEO of Lifespan Financial Planning, the fix that the petition proposes is misplaced.

“My understanding is the amount for each levy component is based on the cost of regulating each sector and I believe the reason the bulk of the costs are calculated on a per adviser basis, is because the majority of the cost goes to regulating advice providers and the advice process, rather than the licensing component,” Mr Ardino told ifa.

He added that while it may result in a lower upfront cost to the adviser, the cost of the levy will inevitably be passed down the chain to the client regardless of the split between licensees and advisers.

“In the main though, the end client pays for all of these costs as they are eventually passed on to clients,” Mr Ardino said.

“Changing the ratio between what the adviser pays compared to the AFSL won’t really have a material impact (although it will result in higher costs to advisers of AFSLs with a smaller number of advisers) as AFSLs will pass on costs to their advisers who pass them on to their clients.

“The big issue for me is to reduce the overall levy to make advice more affordable and accessible to consumers.”

At the time of publishing, the petition had 427 signatures. It closes to signatures on 15 February at 11:59pm AEDT.