Is ASIC levying IFAs to pay for the past advice sins of the big banks?

There is every indication that independent financial advisers are having to pay higher levies to fund the Australian Securities and Investments Commission (ASIC) because they are really funding the past misdeeds of the major institutions.

That is one of the key bottom lines of the Association of Financial Advisers (AFA) pre-Budget submission which has pointed to a “mysterious” increase in the level of the levy from $40.1 million to $56.2 million.

“We observe that more is spent by ASIC on the oversight of financial advice than any other regulated community that ASIC oversees and question the rationale for this, particularly when the number of financial advisers is declining so rapidly and at the same time the professional standards are being increased,” the submission said.

“We seek some clarity and transparency so as to understand what has driven this huge increase, however we presume that it could be the funding of ASIC enforcement action against some of the large institutions that were named in the Royal Commission.”

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“If this is the case, then we strongly object to the proposition that small business financial advisers should be picking up the cost of court action against large institutions, many of whom have chosen to either exit the financial advice market or substantially scale back their advice businesses,” the AFA submission said.

“Many of the advisers have no choice but to pass on any increases in regulatory fees to their clients, which continues to increase the cost of advice and places advice out of the reach of everyday consumers,” it said.

“Where small businesses are picking up the cost for large institutions, this would surely suggest that the funding model is flawed.”

“We call on the Government to provide relief to financial advisers for the 2019-20 and 2020-21 years and to review the model for future years so a reasonable and sustainable levy can be maintained,” the AFA submission said.

“As a minimum, the funding levy should be pegged to the 2018-19 level.

“Whatever the Banking Royal Commission revealed about these large institutions, it should not result in ASIC being able to exponentially increase their costs or to result in an ongoing disadvantage to small business financial advisers and as a result their clients. In the context of this surprise increase in the ASIC spend on financial advisers, we believe that there needs to be a cap and changes to the framework to deliver greater transparency.”