As previously reported by ifa, the explanatory memorandum for the draft legislation on new adviser standards states that the industry could be hit with additional compliance costs totalling $165 million a year, with a split of $77.3 million for businesses and $87.8 million for individual advisers.
In a submission from Pathway Licensee Services to Treasury in response to the proposed bill, the licensee services provider has hit out at the projections, claiming there is no explanation as to how this cost has been calculated.
“There is no indication from the explanatory memorandum as to what will drive these additional costs or whether they are in the area of new advisers or existing advisers and how much might apply to the requirements with respect to monitoring arrangements,” the submission said.
“This represents a very significant increase in costs and the details behind this estimate should be released in order for the industry to consider the consequences.
“This is a very significant additional cost that would eventually need to be recovered from clients and therefore result in an increase in the fees paid by clients,” it said.
Pathway Licensee services also argued that the government needs to complete a regulation impact statement to determine the likely effects the legislation will have on the industry.
“We note that the government has not done a regulation impact statement (RIS) on the grounds that there are strong reasons to proceed with efforts to raise the professional and educational standards,” the submission said.
“Whilst we agree that the grounds for raising standards are compelling, this should not remove the need to complete an RIS.”
The submission said as a minimum, the government should conduct an analysis on the number of advisers who are currently degree qualified and those that hold other qualification levels.
There will be a better understanding of the number of advisers who are “likely to leave the industry” as a result of the increased standards, Pathway Licensee Services said.
Every regulated industry and profession faces costs of compliance. How are professions, such as for example the medical, engineering, accounting and legal professions, able to survive their compliance costs? Do these professions complain about costs of compliance?Is regulating individual financial advisers more costly than regulating other professionals? If so, then why? What additional compliance costs are necessary that say the legal, medical and accounting professions need not be concerned about? Would it not cost more to regulate a doctor, accountant or lawyer than an adviser?