Industry bodies have welcomed the Government’s decision to implement a temporary reduction in cost recovery levies for the next two years and review the Australian Securities and Investments Commission (ASIC) industry funding model.
Announced this morning, the relief would see ASIC levies charged for personal advice to retail clients restored to their FY19 level of $1,142 per adviser for the next two years (FY21 and FY22). The flat per licensee charge would remain at $1,500.
The Association of Financial Advisers (AFA) said: “At the Parliamentary Joint Committee on Corporations and Financial Services hearing with ASIC on Friday 27 August, 2021, the ASIC Funding Levy was the subject of discussion for the first 50 minutes, with probing questions from a number of the committee members.
“The AFA thanks Andrew Wallace (LNP Qld), Bert van Manen (LNP Qld), Senator Deborah O’Neill (ALP NSW) and Steve Georganas (ALP SA) for their passionate pursuit of this matter.”
Dante De Gori, FPA chief executive, said today’s news would provide some certainty and stability to financial planners, allowing them to provide more affordable financial advice to Australians.
“The FPA worked with and would like to thank our members for echoing our concerns about the current formula and their direct engagement with their local members of Parliament over the past two years,” De Gori said.
“This is a significant milestone for the FPA and our members as we have been calling for a review of the flawed model since it was first proposed and then introduced three years ago. We would like to thank the Government for listening to our concerns and those of our members.”
Sally Loane, Financial Services Council (FSC) CEO, said: “The temporary relief will give the 19,000 advisers in the sector hope the Government understands the challenges facing the financial advice industry and will take further action to reduce the costs of regulatory burden on advisers".
However, Peter Johnston, Association of Independently Owned Financial Professionals (AIOFP) executive director, said this was the third Government backdown in three months.
"In the overall scheme of things it is minor compared to life insurance framework (LIF)/Financial Adviser Stanards and Ethics Authority (FASEA)/compliance ramifications, lets not get fooled into thinking they are backing off," Johnston said.
Johnston said the reason the Government backed was pressure from thir backbenchers worried about their own seat at the next election.
"This pressure has been delivered by individual advisers harassing their local not opportunistic associations trying to claim the credit," Johnston said.
"This Government has not listened to anyone over the past eight years unless of course you happen to agree with their agenda.
"The AFA/FPA/FSC cooperation with [former Financial Services] Minister O’Dywer over LIF/FASEA/grandfathering is the most obvious example."
Industry funding model review also welcomed
Treasury would also review the ASIC industry funding model while this temporary relief was in place, which would take place in 2022 and be undertaken in consultation with the Department of Finance and ASIC.
Michael Nowak, AFA National President, said: “The financial advisers the AFA represents are dealing with a requirement to sit a compulsory Financial Adviser Standards and Ethics Authority (FASEA) Exam and meet other education standards to keep their livelihood, on top of an overwhelming volume of other regulatory reform, huge sectoral restructuring and the impact of the COVID-19 crisis.
“It was unjustifiable to expect advisers already dealing with this tsunami of reforms to have to find extra cash to fund a trebling of the levy over two years to support an industry funding model requiring small businesses to pick up the cost of litigation against large institutions.”
De Gori said he looked forward to continuing conversations with the Government on the industry funding model to improve access to affordable and professional financial advice for Australians.
“Our commitment to helping all financial planners build sustainable and scalable practices over the long term will be achieved through a consistent voice and courageous advocacy and a key part of this is through industry collaboration,” De Gori said.
“This shows the benefit for members being part of the largest and most passionate professional financial planning body in the country.
“This review will be a critical piece of the puzzle of making financial advice more affordable for all Australians as it starts with making financial planning more affordable to practice.”
Judith Fox, Stockbrokers and Financial Advisers Association (SAFAA) CEO, said they had called for a review of the ASIC funding model to make it more granular and risk-based to more accurately reflect the firms that were generating the enforcement and supervisory work.
"We therefore welcome the government’s review of the ASIC funding model and its recognition that the financial advice sector is under significant pressure," Fox said.
"Advice to Australians cannot be made more affordable if the costs of providing that advice increase unchecked."