Two industry associations have called for the proposed Financial Services and Credit Panel (FSCP) costs to be appropriately levied as a substantial increase in the corporate regulator’s levy will further drive up the cost of advice.
Both the Association of Financial Advisers (AFA) and the SMSF Association said in their respective submissions to the Government Better Advice Bill inquiry that they were concerned about the costs involved with the single disciplinary body (SDB).
The SMSF Association said: “Whilst the association supports the expanded scope of the FSCP, concerns are held on the pressure the operation costs of the FSCP and supporting role played by ASIC [Australian Securities and investments Commission] will place on the financial advice sector.
“In particular, how will increased operational costs impact the fees, levies and other charges extended already to advisers. The current financial advisers levy already functions on a distorted cost recovery model, which needs review.
“The cost exposure for advisers under the current cost recovery model is significantly multiplied for the remaining pool of advisers as adviser numbers continue to decline. Any significant increase in costs levied on advisers correlates to an increase in the costs of providing advice to consumers. Adequate resourcing will also be a critical factor to enable ASIC to fulfill its role.”
Similarly, the AFA said funding the panel would be through the new adviser registration fee and an increase in the ASIC levy and that in an environment of rapidly rising costs of financial advice practices and increased costs to clients, “a reform of this nature should be on the basis of careful projections”.
“We would like to see an estimation of the cost of this new regime. We do not accept the suggestion on page eight of the explanatory memorandum, that there is a low compliance cost,” the AFA said.
“Importantly, however, we would not like to see the SBD involved in minor and administrative matters. It is also particularly important in ensuring that the costs of the single disciplinary body are kept under control. Otherwise, this will be another factor in driving up the cost of financial advice and taking it out of reach of everyday Australians.”
The AFA also called for the scheduled start of the body to be delayed until 1 July, 2022, from the original date of 1 January, 2022.
“We are concerned that this might be too soon, given that the bill will not be considered until August 2021 at the earliest and that this will leave very limited time for the advice profession to prepare for this regime,” the AFA said.
“This needs to be considered in the context of all the other changes that are happening in the financial advice sector at the same time. We therefore believe that the commencement should be deferred until 1 July, 2022.”
