Self-licensed financial advisers should not be unduly financially penalised when seeking to exit the industry, according to the Association of Financial Advisers (AFA).
The AFA has used its submission to the Treasury consultation process around the Australian Securities and Investments Commission’s (ASIC’s) fee for service model to point to the incompatibility of attaching unreasonably high fees to licensing and particularly license cancellations.
In doing so, the AFA pointed to the likelihood of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services industry leading to more advisers departing institutionally-owned licensees and taking out their own license.
It said the significant increase in costs around licensing at this specific time was “going to have a huge impact upon these decisions and the future structure of the sector”.
“The increase in the cost of ASIC fees-for-service needs to be viewed alongside the other important recent cost increases, all of which could serve to both reduce the number of participants in the sector and drive up the cost of providing advice so that it is only affordable to the most wealthy,” the AFA submission said.
“Financial advisers are also facing a significant cost in undertaking additional education as part of complying with the new Professional Standards legislation. The cost of the education reforms, when viewed alongside the cost of taking out their own licence may significantly impact upon the decisions that some advisers choose to make,” it said.
“There is a high probability that faced with the choices that there are at the moment that many older advisers will decide to exit the financial advice sector rather than invest in their education and obtaining an AFS licence,” the submission said.
On the question of license cancellation, the submission said that it was the AFA’s view that the proposed cost to suspend or cancel a licence was too high and that there should be little or no barrier for someone who had decided that they should no longer be in the business of operating an AFSL to exit.
“If this enables people who are no longer suited or committed to the sector to leave, then we believe there should be a discount on the full cost,” it said. “Having said this, we do not appreciate why it should cost $899 to cancel a licence. Any unrecovered amount, as a result of reducing the cost to cancel a licence, could be rolled into the overall financial adviser ASIC levy.”