On Monday, in announcing the release of the final report on the review of the ASIC Industry Funding Model (IFM), Financial Services Minister Stephen Jones confirmed that the freeze on the ASIC levy implemented by the previous government in August 2021 will not be extended.
The freeze, implemented by the-then treasurer Josh Frydenberg as “temporary and targeted relief” for financial advisers, saw ASIC levies charged for personal advice to retail clients restored to their 2018–19 level of $1,142 per adviser.
The advice community has united in urging the current government to retain the freeze amid an especially large exodus of advisers, but the government has insisted on waiting for the release of the final report on ASIC Industry IFM before making a call on the levy.
Commenting on the government’s announcement, the Association of Independently Owned Financial Professionals (AIOFP) executive director Peter Johnston told ifa that he is “bitterly disappointed”.
“At the end of the day, advisers will pass this cost directly back to consumers,” Mr Johnston said.
“Furthermore, most costs since the Royal Commission have been against the banks and other product manufacturers for misconduct, not advisers,” he acknowledged.
“It is time for the minister to distinguish between advice and product manufacturing and also apply that methodology to the CSLR funding model.”
According to the review, the levy relief cut the total regulatory costs for the sub-sector from $60 million in 2020–21 to $25.8 million, and from $56.7 million in 2021–22 to $22.8 million.
Led by Treasury in consultation with ASIC and several government departments, the review made 10 recommendations that aim to improve the way regulatory costs are recovered, of which four are directed to ASIC.
Mr Johnston has taken most issue with a recommendation that suggests ASIC should be delegated the fee-setting power.
“The AIOFP, its members, and 3 million consumer clients are bitterly disappointed that the federal government will give a government department full flexibility to decide how much tax they will charge an industry. Where else would this happen?” he said.
This recommendation also widely angered ifa readers, many of whom were perplexed by the suggestion.
“Fancy giving a bureaucracy total power to charge whatever they like,” said one reader.
Cost of unlicensed activity to be spread across industry
Also among the recommendations is one calling for the cost of certain regulatory activities, such as taking action against unlicensed operators, to be spread across the “regulated population”, with costs set to be levied from all segments of the financial services industry.
While this could provide a level of relief to advisers, the community had sought that such costs should be borne by those pursuing unlicensed activity alone.
The review, however, found that this would not work in practice.
“The review finds that the recovery of enforcement costs solely from entities subject to enforcement activity would introduce additional complexity and administrative costs into the model that would likely outweigh the benefits of more targeted recovery,” the review said.
Instead, the review recommended that the cost of enforcement action against unlicensed conduct should be allocated to the relevant licensed population that benefits from ASIC’s regulatory effort.
“There is broader benefit to other entities within the industry sub-sector from ASIC’s enforcement action, by maintaining trust and integrity in the financial system and promoting consumer confidence.”
ASIC levy baffles me as ASIC staff are already paid via their wages
Looks like AIOFP’s love affair with Labor may be over. The extra cost slugs from ASIC and CSLR will offset any positive benefits from QAR. Consumers will be the ultimate losers yet again.