The ASIC levy is having a major impact on advice businesses

Alex Burke,  Senior Writer,  No More Practice Education

Per the results of last week’s NMP survey, the vast majority (61.2%) of participants are facing a major business impact as a result of the recent ASIC levy hike, with a further 33% describing the impact as significant but manageable.

One respondent out of the approximately 200 participants described the hike as “another nail in the coffin” of a “destroyed” advice industry. Our community isn’t alone in its outrage; as reported recently, a joint statement by Chartered Accountants Australia and New Zealand, CPA Australia, Financial Planning Association of Australia, Institute of Public Accountants and SMSF Association argued that the latest ASIC levy “highlights serious issues with the funding model and will hasten the exodus of advisers from the industry."

ASIC responds

Since our survey was published, three members of ASIC’s senior leadership – deputy chair Karen Chester, commissioner Danielle Press and recently-reinstated chair James Shipton – appeared before a parliamentary joint committee and attempted to address these issues.

At the hearing, LNP MP Bert van Manen asked the three whether ASIC has the capacity “to ensure that the parts of the industry incurring these large costs” – here referring to Australia’s big four banks and AMP – “actually bear the commensurate responsibility to pay the levy, and that those small businesses in the industry who are not responsible actually pay the levy at a reasonable rate.”

In response, Chester said the consultation that preceded the implementation of the industry funding regime led to “some recognition of gradation in the fees that are levied” across different industry sectors, but that costs have largely increased overall as a result of enforcement actions following the Royal Commission.

Numerator and denominator

Press added that there were two key issues that led to the recent levy hike, with the first being an issue of timing: because ASIC’s litigation costs are “incurred today but not recovered until the litigation is successful, which can be in two-to-three years’ time,” other industry participants bear the brunt of the levy in the short term. This is compounded by what Press called the “numerator and denominator” effect of so many advisers leaving the industry, spreading the levy obligations across an ever-smaller group of industry participants.

Acknowledging the effects of the “horrible lag” in recovering costs from the “big end town” so that smaller businesses see their industry funding obligations reduced, Chester attempted to provide some glimmer of hope for advisers by noting that ASIC is nearing the end of the “big pipeline from the Royal Commission.”

She suggested this would likely drive future costs down, but noted that on an individual basis this prediction is still contingent on the “denominator” (that is, the number of advisers still in the industry) not reducing further in the coming years.

No quick fix

That is, of course, a big “if”. Our own recent research on the subject paints a less-than-rosy picture of advisers’ enthusiasm for remaining in the industry past 2021. And even if you don’t want to take the participants in that survey as representative of the general adviser population, it’s hard to argue with the numbers: nearly 9,000 advisers left the industry in the two years to January 2021.

Could a reduced ASIC levy burden stem that flow? Possibly, but it’s extremely unlikely the industry funding model is the sole culprit here. Assuming it was, though, what can ASIC – or Government more broadly, or even the industry – do about it?

As Chester noted, there is an upcoming review of the Treasury portfolio cost recovery arrangements in 2021; she said this was an ideal opportunity for these issues to be raised. Moreover, there’s also ASIC’s affordable advice review – consultations on CP 332 have closed, but in Press’s update on the project she said advice associations (among other bodies) have been given a “high-level briefing” of the progress thus far, and that individual advisers, licensees and industry groups will be invited to air their views in a series of roundtables set to take place in mid-April.

In the interim, Shipton said that ASIC is in “active dialogue” with the advice industry. He also highlighted that the regulator is open to receipt of applications for financial hardship as a result of the levy hike.

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Ben Dover


ASIC are telling more complete lies. The fines and penalties ASIC charge go to Consolidated Revenue. ASIC are totally corrupt and dishonest. Any fines or penalties ASIC charge will NOT reduce Adviser levies. Please follow this up. It is utter rubbish from ASIC

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