Is the ASIC levy spinning out of control?

Yet again, the advice industry has been rocked by a substantial increase in the ASIC levy.

The estimates for the advice sector in ASIC’s indicative Cost Recovery Implementation Statement (CRIS) represent a 34% increase over the previous year and comprise a $1,500 flat levy plus $3,138 per authorised representative. The increased costs, at least based on ASIC’s stated focal areas over the relevant period, are driven by surveillance and enforcement activities pertaining to COVID-19 relief measures as well as consultation on Royal Commission implementation, unmet advice needs and the LIF review and quarterly data collection on grandfathered commission remuneration. 

The other mentioned focus is policing unlicensed advice, although it’s difficult to imagine how or why licensed providers should be held responsible (in dollar terms) for this activity. 

Trust the numbers?

For advisers still feeling the sting from the cost spike announced earlier this year, these estimates introduce an additional concern: as steep as they may seem now, they could go even higher as the final numbers are tallied up in December. 

While ASIC commissioner Danielle Press said the regulator would “take some heat” for the significant discrepancies between initial estimates and final levies for the previous year, ASIC’s wording in the latest CRIS doesn’t provide much hope for better consistency this time around. 

To wit: “We cannot prevent change in our operating environment or in the conduct of regulated entities between the time the indicative levy is calculated and the end of the financial year. Furthermore, the nature of some enforcement matters could evolve during the year as they progress through the stages of investigation and litigation.”

There’s reason to believe costs may increase between now and the end of the year, too, given that ASIC has been tasked with establishing and operating the new single disciplinary body (SDB) for advisers via the expansion of its Financial Services and Credit Panel (FSCP). While the potential costs of this project aren’t detailed in the latest CRIS, operation of the SDB isn’t explicitly excluded from the scope of ASIC’s cost recovery activity either. 

Open question

Why is there still such a big question mark here? Probably because ASIC doesn’t yet have any answers on the topic. As we discussed last week, ASIC financial advisers senior specialist Martin Stockfield told a Senate committee that it was “difficult for us to estimate the exact level of resources” because “we don’t yet know exactly how many matters and what sort of matters we will necessarily be referring to the [FSCP].”

To be sure, this uncertainty is caused by factors outside of ASIC’s control – as Senator Rex Patrick put it during the committee hearing, “we’re going into this a little bit blind,” adding that “there are questions as to why Treasury haven’t provided the necessary details or, indeed, the regulation impact statements” for the SDB legislation. But according to the FPA, this doesn’t change the fact that the adviser levy as currently estimated is neither equitable or sustainable. 

In a statement, the FPA recommended an immediate review of the estimated levy while questioning the timing of the levy increase “in light of extended lockdowns across the nation,” which have left “millions of Australians unable to work and some businesses struggling to keep staff employed.”

Time for a review

The statement also reiterated the FPA’s past criticisms regarding the unreliability of ASIC’s initial levy estimates and noted that the adviser levy “has been increasing at a dramatic rate that far surpasses the rate of revenue growth for most financial planning businesses, or increases to ASIC’s budget. This is being compounded as the number of registered financial planners in Australia have continued to decline, from whom the levy must be recovered.”

“It has been four years since the levy was first introduced,” the FPA’s statement added, “and it is now critical to review its implementation and impact on the financial services sector.”

Indeed, ASIC’s current costs recovery model appears increasingly unsustainable at a time when the advice sector is rapidly shrinking. It’s possible that the Better Advice Bill could see an amendment that goes some lengths to controlling costs associated with the operation of the new SDB, but that doesn’t address the fundamental issue many advisers have with the levy: it’s not keeping apace with the current state of the industry.


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