Data recently provided to the standing committee on economics by the Australian Securities and Investments Commission (ASIC) revealed that the total regulatory costs for the financial advice sector in the FY2019–20 reached $59.59 million compared with $34.07 million in FY2018–19 and $28.26 million a year earlier.
According to the Institute of Public Accountants group executive of advocacy and policy, Vicki Stylianou, this substantial increase is largely due to the costs of remediation and supervision resulting from the deficiencies on behalf of the banks. And while the number of advisers is decreasing, having now dipped below 20,000, the costs of advice are exponentially climbing.
“We’ve had all of the bank failures and everything that led up to the Hayne royal commission, so a lot of the remediation is still happening. However, we know that the banks have gotten rid of their wealth-creation arms and their financial planning arms, so you’ve got fewer advisers paying for these costs, but they’re paying for the costs that have arisen from the deficiencies of the banking sector,” Ms Stylianou said on a recent podcast episode of ifa’s sister brand, Accountants Daily.
She hinted that perhaps the government should be absorbing a chunk of these extra costs.
“It’s unfair that those who didn’t create that harm and weren’t responsible for those deficiencies, it’s unfair that they should now be paying for them,” Ms Stylianou added.
Levies have steadily been on the increase for a number of years, lifting by as much as 160 per cent in the last two years alone and 230 per cent in the last three years.
Prior to the government’s recent levy cut announcement, estimates for 2020–21 had advisers paying $3,138 on top of the minimum $1,500 per licensee fee.
Having looked closely into ASIC’s actual costs, Ms Stylianou noted that the corporate regulator needs to follow the lead set by others and strive towards reducing costs in every way it can.
She said: “This is where it comes down to accountability and transparency and also efficiency. So we’ve been saying to ASIC along, ‘why have costs been going up? Where are you driving efficiencies to reduce those costs?’
“That is a big part of it.”
Ultimately, she noted, the IPA has seen no serious evidence of ASIC trying to drive efficiency with the view to reducing its own costs.
I didn’t do anything wrong….my clients love me…my satisfaction score is higher than any other industry….If I am paying for the sins of others….than surely I may as well be committing those sins too? Why bother with this aggressive regulatory red tape….So if I am out there paying for the mistakes of a unlicensed advisers, and Westpac selling inappropriate death insurance over the phone….happy to pay an extra $1,000 if I can cut some corners and so why not. Been an adviser for 20 years…perfect compliance record..no complaints…time to lower my standards….and become a shonk.
ASIC, accountability and efficiency simply don’t go in the same sentence. They are the definition of lazy public servants who are more interested in creating regulations that ensure they can retain their fat salaries, under the guise of protecting the general public.
What does ASIC do with the fines levied on the big 4 banks for misconduct, including the record fines for Westpac and the AUTRAC debacle? Disappears into general revenue perhaps?
From what I understand any fines do indeed ‘dissapear into general revenue’; only costs recovered (by court orders against the defendands) offset the levies payable. So we pay for all the court cases, and yet we do not get a share of the fines to offset the costs of litigation.
It is only in the rare case that costs are awarded that it reduces some of the levies payable. Talk about moral hazard! It is in ASIC’s and the Government’s best interest to maximise enforcement action, at our expense (funded by our levies), and for their bottom line (due to the benefit of fines paid). This is also an incentive for ASIC not to try and recoup costs from defendands but instead try to maximise the fines payable, which line their coffers.
It is my understanding that ASIC are there to protect the public at large. As such, I am baffled that advisers and advice practices – who weren’t responsible for the majority of issues raised in the royal commission – are having to foot the bill. Surely any ASIC levy should come out of general tax revenue, not from advisers?
There have been some so-called financial advisers who have been shockers, ripping off people left right and centre. AND the great majority have been employed/supported by the banks. We’re fast getting to the spot only true professionals are left. AND we each are paying for the unconscionable conduct of history – a history that has contributed to mega profits for the banks. Meanwhile the banks continue to make mega profits. This is not right!
Are Financial Planners cowboys. No other “Profession” would allow this joke to happen.
Levies have increased due to a lack of Advocacy and representation by those main bodies that claim to represent Advisers. The FPA does NOT represent Advisers only. As Dante De Gori has said, they also have to represent Westpac Bank and the Barefoot Adviser (all parties in the advice sector) so they can’t really speak out against Westpac, or someone on Tik Tok…..So even though ASIC stated the levy increased due to Westpac’s sins relating to the sale of Contents insurance over the phone, No one is going to stand up and say WTF…. So I think Advisers should be pointing the finger at themselves for allowing this to happen…and failing to have effective Advocacy. The entire Board of the FPA needs to step down.
There will never be accountability where their costs are simply passed on to advisers who have no say or choice in what they pay. Is there any other cost recovery system which works like this? Absolutely crazy, and that’s not even touching on the fact that any fines levied and received are not used to help cover the litigation costs!
ASIC have doubled their costs simply because they can do what it wants. They don’t have anyone to answer to and are a law unto themselves.
And/or is it that ASIC have doubled their costs as the legislation and mechanism put in place by the Government was broken from the beginning?
As an aside – the Banks have been our industries equivalent of Agent Orange… crop dusting the unsuspecting public of their “Brand” of planning (not picking on the planners here, but the greedy Boards and Management) and then once they realise the extent of the contamination they fly off into the sunset leaving the devastation behind.
The remediation should also flow in some way to those that are left helping to clean up/get us out of this mess.
Finally, their social licence should be revoked and they should NEVER be allowed to set foot in this arena again.
Good example but you should pick on the planners as well. You really should. They knew what they were doing.