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.”
Guess who’s going to cover these costs. Clients. The SOA pre fee’s and implementation will remain at the current rates. No thank you Levy.
Ah the classic “user-pays” model, perpetuated by those that are already paid and want to squeeze more from its own users. The problem is that not every user of the model is the same user, nor every user has the same means to pay. We must drill into our heads that ASIC already gets paid via their remuneration, not from this levy.
A scorpion walks up to a river he needs to cross and askes the a frog if he can have a lift across on his back. The frog replies, but you’re a scorpion, you’ll sting me. The scorpion replies, no I wont, or else you would die and then I would drown in the river. The frog things this makes sense so he agrees to give the scorpion a ride across the river on his back. Half way across, the scorpion stings the frog. The frog says, what are you doing! Now I will die and you will drown. Why on earth did you sting me? The scorpion replies, I’m a scorpion, it’s what I do…
The most effective and obvious solution will be to engage with all of our clients (approx. 15,500 advisers av. 100 clients each = 1,550,000 voters), explain the fee and how the IFM works (along with all the other recent additional costs and fees – FDS, OSA’s, CSLR, CYBER Insurance etc.) and have them vote next election for the Govt. that guarantees to scrap the Levy, rather than pass it on to clients. It worked well for Retirees that faced scrapping franking credits and it worked well for Geared Property Investors that faced scrapping negative gearing, with Labor losing the election.
Thank you Eugene Ardino and Philappa Hunt
Not sure how the user pay argument really works or can be measured in relation to the ‘public good’ element of regulation.
Presumably consumers benefit by having ASIC regulate the industry so how much should the government pay on their behalf for this positive spillover?
And should the police be funded by a levy on criminals? Should the army be funded by a levy on civilians?
…in fact the army, police and others are indeed funded by a levy on the public…think its called income tax!! 🙂
I would suggest that given MP Stephen Jones being in the FS role now for over 12 months, and including his stint in Opposition, the clear intent is to wipe us all out once and for all (and that includes previous governments). The Labor Party and Stephen Jones have been sitting on this decision forever, it’s not like a new tax. Why didn’t Michelle Levy cover this in the QAR knowing the longer-term implications on the already decimated Industry? Given the sheer size and length of time to produce the QAR, this was completely ignored. Just wait until the next RC rolls around and do the maths – whoever is left will be footing the next round of ASIC enforcement litigation circa $30k plus adviser.
Mr Jones and ASIC you know it’s wrong… so fix this now.
You have factored in the costs but not added back any recoveries.
And why should I have to cover any costs for bad eggs… based on this logic and as an example – the cost to prosecute a drink driver should be borne by those who don’t drink drive… it’s nonsense and it’s criminal?
Mr Jones you have completely mislead us… it’s Misleading and Deceptive Behavior you have provided.