In its submission to the government’s Compensation Scheme of Last Resort (CSLR) Bill, the Stockbrokers and Investment Advisers Association (SIAA) has argued against the proposed funding model in light of the “significant problems” associated with the ASIC funding levy, which is the model for the CSLR.
The SIAA has argued that weaknesses in the ASIC industry funding model framework will flow through to the levy framework of the CSLR.
One of the biggest flaws in the ASIC industry funding model, the group said, is that levies imposed on the financial advice sub-sector are calculated according to the number of financial advisers on the financial adviser register (FAR).
“This model may work well when the number of financial advisers on the FAR and the amounts to be levied remain stable. However, the decline in the number of financial advisers has been precipitous,” SIAA said.
“A reduction in adviser numbers has resulted in the levy amount per adviser increasing each year in a manner that industry considers to be unsustainable and which has resulted in the former government freezing the levy amount for the 2020–21 and 2021–22 financial years, and a current consultation to review the levy framework,” it continued.
Adviser numbers on the FAR have fallen from 25,484 in 2017 to 15,908 as at 6 October 2022. And, according to recent research, numbers are expected to keep dropping with one scenario predicting a complete adviser extinction in five years’ time.
“We consider that any levy model must take into account the possibility of a continued fall in financial adviser numbers, as otherwise the current framework could result in unsustainable levies,” SIAA said.
“SIAA recommends that as the levy framework for the CSLR will be based on the ASIC industry funding model, the regulations for CSLR that determine how the levies are to be calculated, not be finalised until the ASIC industry funding model review has taken place.”
Moreover, the group said it strongly recommends that the bill not be passed until “we have been able to provide feedback on the regulations as the ‘devil is very much in the detail’ when it comes to the way levies are determined”.
