Will last resort scheme and disciplinary body double regulatory costs?

Financial advice firms, already stressed by the almost 60% increase in the Australian Securities and Investments Commission’s (ASIC’s) industry funding levy, are now worried about levies for the cost of the single disciplinary authority and the compensation scheme of last resort.

The Minister for Superannuation, Financial Services and the Digital Economy, Senator Jane Hume, flagged the legislation for the single disciplinary body by the middle of this year alongside that for a compensation scheme of last resort giving rise to an expectation that the exposure draft and at least some funding arrangements will be announced in the May Budget.

However, advice principals are pointing to the scale of the increases in the ASIC levy and the burden that will be created if firms are to also be levied to meet the cost of the single disciplinary body and the last resort compensation scheme at the same time as having to foot the bill for professional indemnity (PI) insurance premiums.

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Consultation processes with Treasury officials have also given rise to debate around whether a capital adequacy requirement should be imposed on licensees with respect to their ability to meet claims bills.

While accepting that Hume has pointed to releasing the legislation in the middle of the year, senior financial advisers have urged greater clarity with respect to funding arrangements, arguing that advice practices and individual advisers are already hard-pressed.

Outspoken West Australian adviser, Steve Blizard, said the industry had been left substantially in the dark about what the regime would look like and what it might cost.

“What an adviser is paying to be regulated is already high without adding substantial additional cost,” he said.

It is understood that advisers are paying around $2,500 and $3,000 towards regulatory costs each year and this could double if they are asked to fully fund the cost of the compensation scheme of last resort.

Former dealer group chief executive, Paul Harding-Davis, said he believed the cost of the compensation scheme of last resort had the potential to be particularly expensive, adding the equivalent of half the cost of a PI premium for every adviser.

He said that while some people might see the imposition of capital adequacy requirements as attractive, it needed to be recognised that such a move would simply entrench large licensees.

Harding-Davis has previously argued that the compensation scheme of last resort should not be open to advisers with sophisticated wholesale clients who could continue to rely on PI insurance.

Association of Financial Advisers (AFA) general manager, Policy and Professionalism, Phil Anderson pointed out that additionally to the cost of the compensation scheme of last resort and the single disciplinary body there would be the cost of supporting at least some of the functions of the Financial Adviser Standards and Ethics Authority (FASEA).

He pointed out that the funding by the big institutions ended on 30 June and while the functions of FASEA had been devolved to Treasury and the ASIC there would likely be a cost impact on the industry.

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MIA J Hume and ASIC say let’s make Advice more affordable.
Thus that somehow =
i) 160% ASIC Adviser levy increase.
ii) complete 2nd layer AFSL FDS/Optin, SoA vetting, upfront fee vetting at platform level, massively costly compliance duplication.
iii) FARSEA Standard 3 and 5. Yep paid for comment from ASIC to academics. And such far reaching and wide coverage of expected people effected by Advoce to render FARSEA completely unworkable in the real world.
Yes Ms Hume and ASIC you are doing a wonderful job of doubling the compliance costs of already bloated compliance.
Then let’s add the compo of last resort just to finally kill off Affordable advice.
Ms Hume and ASIC, you are either complete LIARS OR MORONS. Or more than likely BOTH. Dumbfounded in Canberra bubble moronic thoughts !!!!

How naïve we were to think that after the RC and the large players exiting, the time of the small, self licensed, semi or fully independent adviser was now finally here to stay. The non-conflicted planner who would put their client first, no vertical integration and no kpi sales requirements handed down from above. Weren't we silly to think things would ever change. We're staring at a 12 grand ASIC levy and our PI just cam in at over 40 grand with zero complaints or issues. I don't think we have any friends except for our clients.

All this - to keep hundreds of public servants in a job to justify their existence. It would be interesting to compare the # of complaints against financial advisers/licensees in a year as compared to the number of public servants in ASIC and the like allegedly "protecting consumers", let alone parliamentary staff. None of these people have any skin in the game, instead siphoning from the trough of industry and taxpayers. At the current rate, the well will soon run dry!

don't forget the ambulance chasing lawyers will benefit enormously as will AFCA.

ambulance chasing?

what about this guy ? real noblemen these lawyers.


The Last Resort Scheme should be funded by the product providers, not Advisers or Licensee.
They are the ones that rake in the cash from the funds under management,
They are the ones that mismanage the funds and who risk the client's money.
We the adviser, recommend the product on the ground it is structured properly and research provided.
Simple the higher the risk the higher the levy for the Product providers.
But hey! It is easy to keep kicking the guys at the bottom until they stop moving. then Yell, point at them and insult them and fine them even after they're dead and buried.
Woo Behold that the fund Manager and Product provider actually take responsibility for their actions.
Especially the long list of Funds that collapsed in the GFC and we the Advisers compensated the clients.
This should be seriously considered now all is transparent in the view of fees and disclosure.
But I guess I just keep screaming into the wind and wait for the next kick or fine.

If we have a last resort compensation scheme and get rid of the need for PI insurance it could work. But we would all be better off just calling ourselves money coaches and ditching all the compliane and unnecessary gouging by various government bodies

Let's start off with stating the obvious which is that the exodus of financial planners has only just begun. The true extent of the impending collapse of adviser numbers will be revealed the closer we get to Jan 2026. I would say from late 2024 onwards is when we will see the 'great drop off' begin. With decreased adviser numbers, the remaining advisers will be forced to take on a greater share of overall regulatory costs which means a much much higher figure than what this article is quoting and what we already pay to practice. Essentially, those in control can throw as many levies at my firm and any remaining firms in the industry as they please and there is nothing we can do about it (it's not as if we have industry representation who are lobbying for us.....). What those in control need to understand is that in response to higher fees my firm needs to pay to practice, I will charge my clients higher fees for advice. As a result, fewer people in my community will be able to afford my advice. The only losers out of all of this are Australians for two primary reasons: Firstly, fewer will be able to afford financial advice and secondly, the lost taxation revenue received by treasury due to all of the practices which will inevitably shut down in the lead up to Jan 2026.
Happy Tuesday peeps :)

If you can't pass on most of these price hikes to clients, then you need to cut expenses, creating more losers, starting with support staff, contractors, office property investors, tricking all the way down to the 17 year old barista who makes your coffee every morning. Basic economics. Sadly this isn't limited to financial advice. In recent years, the public has developed a fond appetite for regulation and consumer protections across the board, which is fine, but attempting to right every wrong can be a slippery slope and comes at a cost (for everyone). When prices rise, innovation stalls, and regulators suddenly shift their focus elsewhere, I wonder how people will cope when they're suddenly put under the spotlight and forced to justify their existence?

Any fees for a single disciplinary body should replace current fees for ASIC, TPB and AFCA. If they don't, then it wouldn't actually be a SINGLE disciplinary body as recommended by the RC. It would be YET ANOTHER disciplinary body.

Similarly any fees for a compensation scheme of last resort should replace PI insurance premiums.

you forgot to add the new platform regulators with their several pages of fee disclosure and permission requirements

In reality, this industry is already dead. It's just a matter of how fast the last nail is hammered into the coffin.

If it's not the overbearing requirements of the regulatory regime, it will be the increasing costs such as PI cover, ASIC fees, Licensee fees and now, compensation of last resort. How many years do you think it wioll take for these fees to eclipse our earnings?

I believe that Jane Hume will be overseeing the loss of this industry. Either that, or her Labor counterpart depending upon whether they get into office early enough.

It's a race to the bottom.

nailed it. it's over red rover for much of the industry. I have said it time and again by 2026, the industry will whittle down to 5,000 advisers. possibly 4,500.

the 5,000 are already very successful and serve HNW clients, they aren't interested in taking on new clients, all retail clients will need to be serviced by either vertically integrated institutions or Industry super funds

the 5,000 that will remain are already fasea qualified, already hold multiple masters and designations. they did their qualifications probably 10 years in advance knowing the day would come when it was mandatory.

ALL OTHERS will simply not survive,(it'll cost you $10k per month just to turn the lights on) and there will be a huge number of ex- advisers who will become money coaches, this is already happening.

so sad, $3 trillion in super, $800 billion being managed by SMSF trustees many of whom haven't the foggiest.

yes, yes, I know some idiot is going to reply saying, I will try and service them all (2.2m), and for you, I have a special reply. you will be one of the 15,200 who will be gone.

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