Adviser levy slashed as Treasury calls for change at ASIC

Alex Burke,  Senior Writer,  No More Practice Education

What a difference one week can make!

Last week, we discussed what appeared like increasing opacity regarding the mechanics that underpin ASIC's industry funding model. One the one hand, we were told the combined factors of the "Royal Commission pipeline" and the shrinking adviser cohort were responsible for the most recent levy hikes; on the other, we were told that advisers would reap only marginal benefits, if any, from ASIC succeeding in its litigation activities. 

These mixed messages invariably contributed to an overwhelming sense of uncertainty concerning how the adviser levy is calculated and imposed. The only certainty, it seemed, was that the levy would go up - indefinitely, perhaps. 

On Monday, though, Treasurer Josh Frydenberg announced that the advice industry would be given "targeted relief" via a reduction in the ASIC levy back to 2018-19 levels: $1,500 per licensee and $1,142 per AR. While the flat fee remains the same, the per-adviser cost is substantially lower than the $3,138 figure in ASIC's latest Cost Recovery Implementation Statement. 

Frydenberg said this reduction would "provide financial advisers with the certainty they need over the next two years to deal with the impacts of COVID-19 and further regulatory reforms making their way through the Parliament, including the introduction of a Single Disciplinary Body and a Compensation Scheme of Last Resort."

While these changes are temporary, Frydenberg also said that Treasury will, in consultation with the Department of Finance and ASIC, review the underlying industry funding legislation in 2022 so as to "ensure it remains fit for purpose in the longer term given structural changes taking place in the advice industry." 

The outcome of that review will be critical for any adviser hoping for more permanent changes to the ASIC levy. As we've discussed previously, the regulations pertaining to the ASIC Supervisory Cost Recovery Levy Act 2017 have the effect of grouping many different types of financial advice businesses together – from large bank-owned groups to small self-licensed advice practices – regardless of their regulatory "footprint", so to speak. Moreover, the regular fines and penalties ASIC recovers throughout the year are diverted to Consolidated Revenue rather than being used to offset annual operating costs. 

If Treasury wants to ensure the industry funding model remains "fit for purpose," these issues will need to be promptly addressed. 

Beyond the industry funding legislation, it appears as if ASIC itself might be undergoing some changes based on Frydenberg's new "Statement of Expectations" for the regulator. You can read the full statement (and ASIC's response) here, but broadly speaking the Government expects ASIC will "identify and pursue opportunities to contribute to the Government's economic goals" - the most pressing of which being "supporting Australia's economic recovery from the COVID pandemic." 

ASIC is also being asked to ensure that its actions are "not inconsistent with the policies of the Government" and that its guidance "is not unduly prescriptive and does not limit business' discretion and flexibility to operate in the manner they see fit while still complying with the law." 

With that in mind, what else do you think ASIC needs to change in order to ensure a healthy advice sector?


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Mervin Reed

02/09/21

I wish the new head of ASIC well as amounts to Treasury telling him that unless he gets his act together and fixes the advice segment there will be huge changes to downsize the regulator that has not delivered. The regulator can readily deliver a 15 page SOA for simple risk and superannuation clients with maybe a 20 page SOA for complex cases. Currently due to the regulator SOA's average 75 pages and are unreadible. The costs of doing these SOA's is transferred to the customers who ring up their Federal member and complain about ASIC. Well now they know that they are on a very short time line to show results by Christmas or wholesale changes will happen. ASIC needs to change or else it will be absorbed by APRA and rightly so. APRA understands the market it services as a regulator but ASIC does not.

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