Last week, we discussed the results of an NMP survey suggesting the vast majority of advice businesses in Australia have been moderately-to-severely impacted by the recent ASIC levy hike.
We also looked into ASIC deputy chair Karen Chester’s comments defending the instability of ASIC levies when she appeared before a parliamentary joint committee. She said that while there is “some gradation” in the way ASIC’s costs are levied across different types of businesses, the larger issue was the lag in between the regulator’s Royal Commission-related litigation costs being incurred and then recovered (assuming litigation is successful).
She also highlighted the “numerator and denominator” effect of the substantial cost pipeline following the Royal Commission and the decreasing number of financial advice businesses around to share the levy burden.
Room for change?
As some readers noted, the assumption that industry funding model is applied largely on these basic metrics – “mechanically,” as ASIC chair James Shipton later suggested, with little room for consideration as to whether, say, a given business can reasonably afford this cost – may not be entirely accurate. Indeed, at a recent Senate economics legislation committee, Senator Jane Hume said ASIC “does have some level of flexibility and discretion” regarding how these levies are imposed.
Hume explained: “I think it's important to recognise that, in relation to the levies imposed on financial advisers, the 10 largest licensees providing personal advice have contributed quite a steady share of around 20 per cent of the total levies that the sector has had imposed since the industry funding model has been put into place.
“I understand that the industry funding model was suggested, I think, in the Wallis inquiry first of all and then followed up by the Murray inquiry. This has been a sector in particular that's seen quite seismic structural change.”
The FASEA question
One particular structural change in the advice industry – the creation and subsequent dissolution of FASEA – was highlighted by the same committee. Senator Jenny McAllister and ASIC commissioner Danielle Press discussed the distributed responsibilities for adviser professional standards after FASEA is fully abolished, and Press noted that “the regulation hasn’t been finally settled” with regards to whether ASIC or Treasury will be overseeing the Code of Ethics and educational requirements.
While Hume said the specific legislation detailing these responsibilities will be open to consultation “very soon,” there was another question raised that may be cause for some concern within the advice community: upon assuming its new post-FASEA responsibilities, will ASIC contemplate increasing its levies to cover the cost of administration?
In response, Shipton said that if ASIC’s costs increase and that’s approved annually by budget, “there will be a cost increase.”
He added: “I can't speculate whether or not a specific item which is to be determined will or will not increase fees at this stage, except to give you that sort of general mechanical response.”
Following on from Shipton, Chester said that only in circumstances where the Government did provide greater funding for ASIC’s FASEA responsibilities would additional costs be incurred by the industry. If this doesn’t occur, she said, “we would absorb it.”
Chester also reiterated her comments regarding the inflexibility of the current industry funding model – increased costs are “a result of that model, not a result of anything we can actually do,” she explained – and noted once again that there is a review of Treasury portfolio cost recovery arrangements taking place later this year.
Given Senator Hume’s remarks regarding the flexibility available to the regulator, though, it would appear there is some disagreement in Government as to how these levies should be applied.
The opinions expressed in this content are those of the author shown, and do not necessarily represent those of No More Practice Education Pty Ltd or its related entities. All content is intended for a professional financial adviser audience only and does not constitute financial advice. To view our full terms and conditions, click here
According to a new piece of research from the FPA, many Australians stil....
A group of industry and consumer associations have jointly condemned the Go....
13 October, 2021
According to a new piece of research from the FPA, many Australians still don't see the value of advice, with nearly half (41%) of participants exp....
13 October, 2021
06 October, 2021
Following on from last week's discussion about the Better Advice Bill amendments, we look into why the price of admission to FASEA certification is....