Good advisers being made to subsidise the bad

The vast majority of financial advisers who do the right things should not be made to subsidise those who do the wrong thing under the user-pays model devised to fund financial services regulation, according to the Association of Financial Advisers (AFA).

In a submission filed in response to the Australian Securities and Investments Commission’s (ASIC’s) Cost Recovery Implementation Statement, the AFA said it believed the new regime should be on a genuinely user pays basis, “as opposed to the proposed model where those who do the right thing, subsidise those who do the wrong thing”.

The AFA pointed to a table within the ASIC document noting that of the total $26 million being spent on licensees that provide personal advice to retail clients, a total of $12.2 million (46.7 per cent) was being spent on surveillance and enforcement.

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It said that when what would appear to be fixed costs such as “governance, central strategy and policy, and central legal functions”, IT support, operations support, property and corporate services and capital expenditure were excluded, this increases to 89.7 per cent of the variable cost.

“Clearly the vast majority of costs for licensees providing personal advice to retail clients is driven by those licensees doing the wrong thing, yet this cost is being subsidised across all licensees and all financial advisers,” the AFA submission said.

It said on this basis, the AFA would like to see more visibility on the cost of major remediation/enforcement programs that ASIC was undertaking.

Elsewhere in its submission the AFA pointed to the additional cost being imposed by the funding regime and said this, along with other recent and expected increases “will make it more costly to provide financial advice, which means that either these costs need to be passed on to clients or less businesses will be in operation”.




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Who cares. When your pay depends on how many people report to you, the key performance driver is "get more people on the ASIC payroll"

Please note what has happened in the UK before saying "who cares?"!! It's worse than "good advisers pay for bad" - it's CURRENT good advisers pay for DEAUTHORISED bad advisers. When you have a "last one still standing turn the lights out" system it won't be long before everyone cares - but by then it will be too late and the regulatory costs of picking up everyone else's pieces will itself put people out of business. Not good.

Dear Gill, I understand your position. I was being factious. Many Public Servants are paid based on the size of their department. So the bigger your department the bigger your wages. With this type of conflicted remuneration policy it encourages waste and excess, and you continually need to search for new sources of income. Charging Good advisers to fund your department may make sense to some public servants.

Spot on Gill, ASIC dont just investigate Authorised Reps, their charter is a lot wider, but we are the only ones they can bite for the cash...we are just so badly under representated at every level so we get walked all over, we need to stand up and say no now and then! Oh for a leader for our industry! Many talkers not many walkers, they are a bunch of gutless buggers our associations, not worth paying membership fees for!

So, this is about the future of the UK's single dispute resolution scheme (FOS) :
And this is about the future of our compensation scheme of last resort (FSCS) - SIPPs are our SMSFs:
If your trade associations are not arguing about this now then join them and make them address it - oh, and it will get worse the more that individuals leave your larger dealer groups to self-licence - banks and insurers tend to have the resources to pay these costs, especially if they vary dramatically year to year - the more advisers are in directly authorised or independently owned firms the worse it will be when claims (and associated levies) start to bite, as it won't just be the amount that frightens you, it will be the fact that you will be unable to budget for it year by year!!

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