In its latest Cost Recovery Implementation Statement (CRIS), published last week, ASIC confirmed that to cover the cost of regulating licensees that provide personal advice to retail clients, which stood at an estimated $55.5 million in 2022–23, advisers will pay a minimum levy of $1,500 per licensee plus $3,217 per adviser.
The levy was frozen in August 2021 by then-treasurer Josh Frydenberg as “temporary and targeted relief” for financial advisers. Among other things, it saw ASIC levies charged for personal advice to retail clients restored to their 2018–19 level of $1,142 per adviser.
Speaking on the SMSF Adviser Show podcast, Smarter SMSF chief executive Aaron Dunn said that categorising the adviser response to the ASIC levy as outrage might be an understatement.
“Quite clearly there is a fairly big shock to the industry that the jump is significant. Of course, the acknowledgement there would be that there’s been a freeze and naturally there’s been fairly substantial inflationary increases in that,” Mr Dunn said.
“But I think those types of jumps are going to have a pretty dramatic impact on practices and advisers in this industry at a period of time where we’ve had recognition of the frustration of advisers and advisers leaving the industry for a whole range of reasons.
“We don’t need something else to add on top of this that is going to get put in jeopardy the number of advisers that sit in the industry.”
Mr Dunn added that the size of the increase is contributing to adviser concerns, with the levy almost tripling.
“I think there are some real problems in here around the level of increase,” he said.
“The lack of clarity and transparency around what we’re seeing, and therefore the fact that we just accept this and move on, I think would be really, really frustrating for those advising in the industry.”
With the cost of regulation being split among advisers, Mr Dunn noted that as more leave the industry, those remaining pick up a larger percentage of the tab.
“Ultimately, those that are left have to carry the can, and they have had to carry the can in many aspects, [with] the way in which they have to comply with the law in respect to many things that have happened in the past that were of no fault of their own either,” he said.
“It’s just one other example of those that are left are left to carry those costs. And when we think about the affordability of advice, this is only going to add to that.”
Mr Dunn also pointed out that the levy increase “flies in the face” of the work done by the Quality of Advice Review (QAR) to make advice more affordable.
“We’ve got the QAR that is trying to appease some of the process and the costs that sits within this unit,” he said.
“On the flip side, we’ve got other costs that are then going to come straight back in, and those are going to ultimately be passed on to consumers as well.”
Last week, SMSF Association chief executive Peter Burgess said that the ASIC levy is a massive increase, particularly for advisers who are self-licensed, who will also be on the hook for the $1,500 minimum levy fee charged to each licensee, for a combined cost of $4,717.
“The exodus of advisers from the sector is well documented and this latest fee increase will have a significant financial impact on those who remain in the sector under ASIC’s cost recovery model,” Mr Burgess said.
He added that with many advisers operating small businesses, these kinds of fee increases are difficult to absorb.
“Particularly in the current economic climate, these cost increases are not sustainable, and we would urge ASIC and the Government to rethink this decision,” Mr Burgess said.
To hear more from Aaron Dunn, tune in here.
Well I know I’m not the first adviser to make this comment but when we pay this adviser levy (and many AFSLs pass this cost on to ARs and CARs), we should ask ASIC on what date will they be around to do their supervising? Come and tell me where I am going wrong. No? I asked ASIC for a copy of their checklist for auditing client files. They refused to provide it and said it was subject to copyright! Also, the self reporting regime is clear evidence that they are not supervising in any normal sense of the word. Absolutely, ASIC, this is fees for no service. [i]P.S. I am not the Paul Tynan from Brisbane or Melbourne.[/i]