The Government has again been warned that it risks significantly escalating the cost of providing financial advice through the creation of the Australian Financial Complaints Authority (AFCA).
This time, the SMSF Association has told the Senate Economics References Committee that while the organisation supports the creation of a one stop shop external dispute resolution body “we do hold some concerns that costs for advisors who currently subscribe to the Financial Ombudsman Scheme (FOS) or the Credit and Insurance Ombudsman (CIO) may rise depending on the fees levied by the AFCA”.
The submission urged the Government to pay careful attention to the increased costs associated with the creation of the AFCA and suggested that fees should not be increased beyond those already paid to FOS and the CIO.
“We believe that the legislation should include reference to ongoing costs for members of the new EDR scheme to ensure that fees are maintained at a reasonable level (for example, not increased above current levels paid to FOS or CIO),” the SMSF Association submission said.
It said this was especially relevant as financial advisers and licensees would face increased costs in the immediate future through ASIC cost-recovery levies and the new education and ethical framework for financial advisers.
“We are wary of increased financial costs to advisers depending on the fee structure of the AFCA,” the submission said. “We believe the minister should ensure that during the selection process of the company that will form the AFCA, that industry fees are a key consideration and should be constrained to existing levels (e.g. FOS or CIO fees).”
“Ensuring that fees for the new EDR body are constrained is especially important given the increased costs facing financial advisers,” it said, noting that there would also be the regulatory compliance costs of:
- Training for advisers to understand the new EDR scheme;
- Changing disclosure requirements and documentation for clients; and
- Sharing of internal dispute resolution information with ASIC for licensees.