Addressing a parliamentary inquiry into the Australian Securities and Investments Commission (ASIC) on Wednesday, Sarah Abood, the chief executive officer of the Financial Advice Association Australia (FAAA), brought up concerns regarding the ASIC levy and the corporate regulator’s lack of transparency.
“We think our members may be paying for expenditure that shouldn’t be attributed to them. However, we have no visibility of how ASIC attributes its enforcement costs,” Ms Abood said.
“Very little information is provided to the regulated population on how its money is being spent.”
Ms Abood said “more transparency” would allow for any errors to be picked up, ensuring costs are being shared fairly.
“As I understand it, ASIC attributes enforcement costs first to the sector that it feels was attributable for the enforcement and I think that number was $18 million, and then based on the enforcement cost, it then attributes its fixed costs and its operating costs to sectors in the same proportion.
“So, we think that’s the reason why the cost for our sector has escalated so rapidly. That those enforcement costs may possibly have been attributed to our sector incorrectly.”
In its latest Cost Recovery Implementation Statement (CRIS), published in June, ASIC confirmed that to cover the cost of regulating licensees that provide personal advice to retail clients, which stood at an estimated $55.5 million in 2022–23, advisers will pay a minimum levy of $1,500 plus $3,217 per adviser.
Under the former government’s ASIC levy freeze, the costs charged to the sector amounted to $22.8 million. This meant that at the time, advisers were charged a minimum levy of $1,500, plus $1,142 per adviser.
Ms Abood earlier highlighted the issue of a “complete lack of clarity or transparency” regarding the allocation of proceeds from ASIC’s enforcement activities.
“ASIC has estimated expenditure of $18.2 million in 2022–23 on enforcement activity in our sector, yet recoveries are only $2.1 million. Financial advisers are funding litigation costs against large institutions when the fines are going to consolidated revenue, and advisers are left with a tiny fraction of these costs being recovered,” said Ms Abood in late June.
“For example, ASIC was successful in court against Westpac in April 2022, with $113 million in penalties being awarded in this single case (which included advice-related matters). What has happened to those penalties? Have they simply gone into consolidated revenue? If that is in fact the case – that financial advisers are funding ASIC action against these participants, and yet the government is keeping all the proceeds – then this breaches really fundamental principles of fairness and equity.”
At the time, Ms Abood also stressed that when the levy was originally frozen, at $1,142 per adviser, the profession had substantially more participants than it does now.
“The increase for this financial year, to an estimated $3,217 per adviser, almost triples the costs. Advisers will be forced to pass the cost increase on to consumers at a time when we are all working hard to make financial advice more affordable.
“We call upon the government to urgently reconsider the removal of the freeze in light of the flaws in the model being used to calculate the levy, and the negative impact on Australian consumers who will ultimately bear the costs.”
The government has yet to respond to the issues raised by the FAAA.
No mention of the deeper issues of corruption and incompetence where ASIC have an adversarial culture or environment where ASIC wants to eliminate Advice delivered via Advisers. An attitude of pandering to Super funds.
Yes, it’s an issue to raise… but I wonder about this softly softly approach. Is this because a previous FPA Director ended up getting paid more than most Financial Planners make in a year as a consultant for a few days?
It makes you wonder when it was decided that we, as Advisers, stopped being consumers. If we were a consumer group whose funds were being misappropriated, or unfair fees placed on us, there’d be a raft of lawyers screaming out to start a class action……
Thank you Sarah and FAAA. This is a fight we must win as it is unfair and inequitable that any actions taken by ASIC that are successful that the penalties do not come back into the pool to ease our levy burden and that the Government pockets successful actions into consolidated revenue. Stephen Jones is doing a fine job but says he has more urgent matter to deal with in QAR and that the levy issue will have to wait in line. Why not just reapply the freeze until such time he can look at the levy issue?
Perhaps Stephen Jones is more a friend of Industry Super and is simply spinning you along?
Compensation to advisers for the turned off trail commissions still not a conversation the FAAA can have! Pathetic representation. Our assets were taken off us with no compensation and the representative (FAAA) still say nothing but want yearly membership fees. Ridiculous.
Correct:
I know there were at least 2-3 occasions where under FOI requests were made for the release of the specific legal advice provided to Bill Shorten
in relation to the contractual arrangements advisers had in place regarding continuing commissions pre 2013.
Bill Shorten made a decision to retain these income streams for advisers based on the legal advice provided.
The FOI requests were rejected on every single occasion by Treasury ( most likely under direct instruction from Josh Frydenberg) citing legal privilege and were refused release.
This is an absolute disgrace and then the Liberal Party set about cancelling these income streams to advisers even though Bill Shorten’s legal advice & evidence showed & recommended they should be retained.
Compensation should rightly be forthcoming.
Before 1 July 2013, I had a lot of working class clients with small amounts invested in managed investment funds and I relied on pooling trail commissions to provide their robust financial planning services. After commissions on retail investment by Labor Union lawyer, Minister of Financial Services Bill Shorten were banned after 1 July 2013, I stopped taking on small working class clients, therefore Labor policy shot itself in its own foot. Secondly at the Asia Financial Forum in Hong Kong in January 2011, in an AustCham function, I asked Hon Minister Shorten to reintroduce IT2201 (1985) with its actuarial funding formula for superannuation contributions, because it cuts back on those with too much in super and opens the gate for too little in super. The response of the Minister was “no politician would vote for actuarial funding (contributions) formula and please leave alone to drink champagne.” Labor’s excellence in mathematical calculations is from 2025 for 30% tax on earnings on superannuation assets over $3 million. Pity the working class workers of Australia …
Senator Andrew Bragg and every financial adviser listed on ASIC’s Financial Adviser Register have not received any transparency since the first levy of financial advisers since 2018. FPA was useless and would not engage its members in affirmative action. Yesterday, my affirmative action emailed an FOI request letter to ASIC Senior Manager – Freedom of Information to provide a copy of documents for financial years 2018, 2019, 2020 and 2021. I paid the levies and I should be entitled to the information on how the yearly levies were calculated. If you are not happy to give Treasury its 1.6 times ASIC enforcements costs (quote Hon. Stuart Roberts) by paying the 2022-23 levy of $3,217 each, each adviser on ASIC’s FAR register should be sending in their own FOI request for the years 2018 to 2021. I am happy for advisers to use my FOI request letter as a model template, by sending an email to figtree495@iinet.net.au
Great work Sarah and FAAA
Hold the kudos.! The AFA/FPA should have jumped all over this with great aggression in 2018 when the Liberal government introduced the ASIC advisor Levy on a Users Pay principal. They both were, as usual, to nice to the Coalition and failed to ask for details how ASIC arrived at the fee, and what would happen when adviser numbers reduced as they were already doing in 2018. It’s very late now, and ASIC have got quite used to sucking on the teat of the Advisor Levy CASH COW
They don’t want to risk those consultancy jobs do they? Best to focus on helping you adapt, by providing a few webinars.
It is good the FAAA is raising the adviser tax, however the issue isn’t just that we’re paying for ASIC’s court fees. The issue tis that this great big tax exists in the first place. And that the section of the market which is most questionable are not paying anything – that is industry funds providing advice and wholesale advisers.
Great points and I’d add unlicensed “advisers” too
ASIC don’t DO anything about unlicensed “advisers” though – even if you make a complaint (as I did). The most that ASIC will do is investigate an unlicensed person AFTER complaints by consumers.
Well done Sarah!
Amazing that there are some people in this industry still hopeful of a tail coming up when they are playing against an opponent with a 2 headed coin
so true, it’s good to be optimistic but better to be realistic.