Addressing a parliamentary inquiry into the Australian Securities and Investments Commission (ASIC) last week, Sarah Abood, the chief executive officer of the Financial Advice Association Australia (FAAA), said she is concerned advisers may be paying for expenditures that shouldn’t have been attributed to them.
Speaking to ifa following her Senate appearance, Ms Abood explained that ASIC’s enforcement division remains off limits to advisers, meaning it’s almost impossible to probe the rationale behind the numbers.
Ms Abood explained that not only is ASIC’s enforcement division closed to advisers, the FAAA has not had much luck in eliciting their response.
“As far as I know, we’ve never met with them. It’s like a black box when things get to enforcement, you don’t know what’s going to happen. I think that’s the case even within the organisation. The advice team themselves don’t have a lot of information about what the enforcement team are up to,” Ms Abood said.
“The biggest concern for us is transparency. We think they could probably enjoy a great deal more support if they were willing to be more transparent about their activities and their rationale about things,” she added.
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.
ASIC also estimated expenditure of $18.2 million in 2022–23 on enforcement activity in the advice sector, while recoveries are only penned at $2.1 million.
Direct impact on advisers
The ASIC levy, Ms Abood stressed, is a big focus for the FAAA because of its direct impact on advisers.
“It’s kind of symbolic of the way that the regulator wants to engage with the sector, so we’ve asked a couple of times for more information. We’re broadening our request,” she told ifa.
“So, as I said at the Senate inquiry, the numbers look wrong to us. How could they really have spent $55 million on advisers which is more than they spend on super funds and listed companies?
“The other thing that really pricked up our ears was the $34,000 they spent on the wholesale sector. That just can’t be right. It would be a massive scandal if ASIC were not undertaking any regulatory activities in the wholesale sector. That’s a really big sector. That’s 16 per cent of the Australian population. There are almost 2,000 wholesale licensees.
“So, I find it pretty hard to believe that ASIC would seriously be going light on the people that deal with high-net-worth individuals. I don’t think that would be the case, but that’s what the numbers are suggesting.”
A mistake has been made
The FAAA’s view is that “someone has just made a mistake”.
“Someone has allocated a case incorrectly to the sector, but we can’t get to the bottom of that unless we can see the numbers. So that’s what we’re asking for,” she said.
The FAAA is, however, yet to get the sought documentation from ASIC.
“There’s a whole lot that ASIC believe they can’t do due to legislation, so there will be particular acts or regulations that say that they can’t share certain information. It may be that we need to seek some help from the government directly,” Ms Abood said.
“If you ask, presumably they’ll provide the information.”
She stressed that the FAAA will “keep trying”.
“We can’t let ourselves be put off by this, because it’s such a big issue.”
Under the former government’s ASIC levy freeze, which was in place during the pandemic, the costs charged to the advice 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.
It’s a Michelle Levy…!
Very clever Sarah, to call it an “accounting error”.
Everyone knows it’s due to ASIC’s chronic bias and corruption, but I guess the head of FAAA can’t really say that in a public forum. Let’s hope Andrew Bragg goes hard on “reconciling the accounts” and publicly exposes ASIC as a rogue regulator.
may as well go unlicensed and give advice, alot less penalties and don’t have to deal all this added expenses, PI insurance, licensee fees, software fees, ASIC fees etc etc,
Every financial adviser in Australia should send an FOI Information request to ASIC, and request that ASIC information copies should be sent to FAAA and Senator Andrew Bragg, Chair of the Senate Economics Committee. If advisers send an email to figtree495@iinet.net.au I will provide a template copy of my FOI request. If ASIC receives several hundred FOI requests from financial advisers, this cannot be ignored or fobbed off. If you want to not have to pay $3,217 each for 2022-23 Industry Funding Levy which provides no value from the levy to financial advisers, who do no wrong, you need to send in your FOI request.
Remember, ASIC is full of corporate lawyers who loathe financial advisers, which is why they are soft on financial institutions, who will provide their next job, ie, Agency Conflict. The trebling of the levy since 2018 correlates to the Hayne Royal Commission into misconduct by financial institutions, to which it appears financial advisers paid its enforcement costs. That is what my draft FOI request asks ASIC to show which enforcement cost relates to a Adviser Number in its Financial Adviser Register and which enforcement costs do not?
Ross Smith
I think keep it up, but I also find it disappointing that ASIC was never challenged when the $200,000 weekend consultancy gigs were being tossed around to former FPA directors by ASIC. I remember a time when Australians needed ASIC to be held accountable and Advisers were committing suicides just how quite the FPA was. Apart from the typical statements of “it’s early days yet, let’s not overreact”. I’m more convinced than ever that we’ve probably got one of the most corrupt financial services systems going. How is it possible one brand new CEO can start asking questions and previous CEO’s of the FPA remain silent whilst Advisers are killing themselves?
keep fighting for us Sarah because we (Advisers) have funded a disproportionate amount of this recovery for years!
Excellent work, FAAA.
When ASIC appointed Australian Super as their preferred default super fund Qantas were in a deal with them offering bonus Frequent Flyer points if you transferred other funds across or joined up other family members.
I didn’t think that super funds were allowed to offer incentives to induce a consumer to join or transfer other monies
(which may be detrimental to their financial position) when those incentives had nothing to do with the sole purpose of managing members retirement benefits.
Is Qantas the preferred carrier for all ASIC staff flights and do they receive discounted air fares as a result of the previously agreed arrangement with Australian Super & Qantas ?
This is about punishment.
This is about going back to the release of the manipulated & failed REP 413 Review of Life Insurance and ASIC’s goal of eliminating Life Insurance commissions forever.
They were then involved behind the scenes with both LIF and then the diabolical experiment that was FASEA.
ASIC were instrumental in funding academic ” research ” papers into Adviser Ethics and were way too close to CHOICE throughout the submission process for the Code of Ethics formation which tried to effectively ban Life Insurance commissions under Standard 3, but didn’t succeed.
This is about punishment, ASIC do not like Financial Advisers and never have.
This is about attributing costs for other practices to the cohort they despise the most.
Punishment, ideology and corruption all play a part.
Wow I am actually rather impressed with Sarah Abood / FAAA’s ongoing approach here to ASIC Levies.
But hey let’s see if they actually achieve anything ?
[b]ASIC = Arrogant, Secretive, Incompetent and Corrupt [/b]
Sarah is a really considered, intelligent voice in a regulatory and government environment of self-serving, specious conflicted pricks.
It is not a levy. It is a Great Big Tax. Predominantly on small business. And somehow the big super funds get out of paying it. The Great Big Tax needs to be imposed on general advice providers as well.
“So, as I said at the Senate inquiry, the numbers look wrong to us. How could they really have spent $55 million on advisers which is more than they spend on super funds and listed companies?
Remind me, did ASIC refuse to release it’s gift register?