Reacting to the Compensation Scheme of Last Resort (CSLR) levy, the Financial Advice Association Australia (FAAA) said more fees on top of the existing ASIC levy will drive advice firms out of business.
It was announced this week the levy that the financial advice sector will have to pay to meet eligible compensation claims and costs from 1 July 2024 to 30 June 2025 will be $18.5 million, out of a total $24.1 million estimate across the financial services industry.
Divided between the 15,624 advisers in the industry currently, this works out around $1,200 per adviser.
Reacting to the announcement, FAAA chief executive, Sarah Abood, said the levy figure “flies in the face” of stated goals to improve the accessibility and affordability of financial advice.
“The CSLR is intended to promote trust and confidence in the financial services sector and in particular, financial advice. However, if advisers are driven out of business by rising costs, through being made to pay for the poor behaviour of those who left the sector years ago, there won’t be a financial advice sector left to have confidence in.
“Coming as it does on top of an historically high ASIC levy, this flies in the face of making advice more accessible and affordable for consumers, which is the stated aim of our government.”
The ASIC levy for 2022–23 was $2,818 per adviser, a figure that was reduced from $3,217 following industry backlash after seeing the figure had a 180 per cent increase on the 2020–21 levy.
She particularly flagged the impact that Dixon Advisory was having on claims, what would typically be a “black swan event”. The Australian Financial Complaints Authority (AFCA) said it has received almost 2,000 complaints from consumers about the firm – the largest volume against a single company since AFCA was established five years ago.
“The emergence of the Dixon Advisory ‘black swan’ event, and the shortening of the initial period which is funded by the government, appear to have had a highly retrospective and negative effect,” Abood said.
“It is extremely concerning that because of these issues, the high quality and compliant financial advisers of today are being asked to fund compensation for the clients of Dixons, a firm which has been in administration now since January 2022 – over two years ago and long predating the establishment of the scheme.”
She suggested Dixon complaints should be filed under “legacy complaints” and urged the government to remove retrospectivity by covering historical claims based on the date the claim is made, not the date the claim is finalised.
This echoed comments by her fellow FAAA colleague, Phil Anderson, that Dixon will have ramifications on future levy payments.
“There are no absolute controls, and we live in fear of another black swan event,” he said at the FAAA Congress last year.
Good luck folks in the future running your businesses. After 20 years it’s time to move on. The risk, red tape, increasing costs and constant belittling of my role as a self employed financial planner have won. I concede defeat. I am getting my business ready for sale.
I keep reading with dispair about the twist and turns happening in the industry
Previous and current governments are like a batch of sghool girsl playing with their toy tea sets.
LEAVE THE PLANNERS ALONE I CAN NOT SEE A REASON WHY ANY ONE WOULD BE IN THE BUSINESS THESE DAYS!!!!!!!!!!!
Feels like every time I turn around theres another punch to the head from the government. Been hearing for years about how everything is getting better, easier to practice, less redtape. All I’ve seen so far is more red tape and more fees. At this point as a two adviser practice 15% of my revenue now goes to just funding levies/insurance/fees – AFCA fees/PI/CSLR/ASIC levy/audit fees/cyber insurance etc.
Not sure why I’m here anymore.
This is a joke, the government is set to drive out the non aligned self employed financial adviser and pave the way for industry super funds to have inexperienced “qualified advisers” provide “good advice” for the super fund, and breaching standard 2,3,5,6 and most likely 9 12….It’s hard to keep motivated.
So I pay ASIC $3,217 for the year to regulate industry and stop poor practice and weed out the bad eggs, yet due to their incompetence and inability, I then have to pay and additional $1,200 per year to compensate the failures of others and more importantly ASICs ability to stop them. $4,417 per year for the inability of the Government to enforce and regulate their own laws.