Amid industry speculation that the Government might raise the so-called “ASIC levy” by as much as 20% to cover off the cost of increased activity by the Australian Securities and Investments Commission (ASIC), the Financial Planning Association (FPA) has made clear further increases will only add to the cost of financial advice.
The FPA has made the point that the cost of regulation of financial planning is going up but there are fewer planners available to meet that cost.
The FPA has used its pre-Budget submission to call for a review of the levy arrangements to make them more predictable in circumstances where it had risen every year since the Government adopted the Australian Securities and Investments Committee industry funding model.
“While the FPA supports an industry-funded regulatory model, two major issues have become apparent since the levy was first applied in the 2017-2018 fiscal year,” FPA chief executive, Dante De Gori said.
“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,” he said, pointing out that for the 2018-19 financial year ASIC predicted in March of 2019 that the per financial planner amount for the levy would be $907.
“By the time invoices for this year were issued in January 2020, the per financial planner amount had risen to $1,142. This is a 26% increase in just ten months,” De Gori said.
“Similarly, for the 2019-20 financial year ASIC predicted in March of 2020 that the per financial planner amount for the levy would be $1,571.The FPA expects the amount will have risen further to around $2,000 – an increase of nearly a third.”
“The levy has been increasing at a dramatic rate that far outstrips the rate of revenue growth for most financial planning businesses and is being exacerbated by a reduction in the number of financial planners from whom the levy must be recovered,” De Gori said.
“The levy per financial planner has increased from $934 in 2017-18 to approximately $2,000 in 2019-20. In three years of operation, the levy for financial planners will likely have more than doubled and there is no indication that increases of this scale will cease for 2020-21 or future years.”
He noted that over the 2019-20 financial year, the number of financial planners from which this budget must be recovered has fallen from around 25,600 to around 22,500 – a loss of 3,100.
“As a first step in addressing these twin challenges of predictability and dramatic levy increases the Government should undertake to review the ASIC industry levy,” De Gori said.
The FPA submission urges a review that considers whether the current method of recovering the entirety of ASIC costs relating to financial advice through the levy is appropriate, particularly given that much of the additional cost being recovered relates to specific enforcement action against a small number of financial services businesses.
