The current formula for the Australian Securities and Investments Commission (ASIC) levy is not equitable or sustainable, and must be reviewed immediately before more financial planning practices are forced to close, according to the Financial Planning Association of Australia (FPA).
ASIC released its Cost Recovery Implementation Statement (CRIS) for 2020-21, which would charge licensees $1,500 plus $3,138 per financial adviser, an increase of $712 over the previous financial year.
Dante De Gori, FPA chief executive, said the ASIC levy for financial planners had gone up by over 340% in the last four years and was on an unsustainable trajectory.
“In light of extended lockdowns across the nation, the FPA questions the validity and timing of the increase, with millions of Australians unable to work and some businesses struggling to keep staff employed,” De Gori said.
“The FPA strongly recommends that the ASIC industry levy be reviewed immediately to provide a more equitable and predictable annual levy, and for the year-on-year increases to better reflect the capacity of the financial planning profession.”
The FPA acknowledged the need for an industry-funded regulatory model but said two major issues had become apparent since the levy was first applied in the 2017-2018 fiscal year.
“Firstly, the levy amount each year has proved to be unpredictable, which makes it practically impossible for a financial planner to effectively budget for this business cost, particularly by a profession that is dominated by small and medium-sized businesses,” De Gori said.
“The FPA notes last year's estimate was wrong by 54% (i.e. between the CRIS and the final) so the actual levy figure could be significantly higher.
“Secondly, the 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.”
De Gori said this was being compounded as the number of registered financial planners in Australia had continued to decline.
“As a first step in addressing these challenges of predictability and dramatic levy increases, we call for the Government to urgently and immediately undertake a review of the ASIC industry levy,” De Gori said.
“It has been four years since the levy was first introduced, and it is now critical to review its implementation and impact on the financial services sector.
“Making financial advice more affordable for all Australians starts with making financial planning more affordable to practice.”