Data recently provided to the standing committee on economics by the Australian Securities and Investments Commission (ASIC) revealed that the total regulatory costs for the financial advice sector in the FY2019–20 reached $59.59 million compared with $34.07 million in FY2018–19 and $28.26 million a year earlier.
According to the Institute of Public Accountants group executive of advocacy and policy, Vicki Stylianou, this substantial increase is largely due to the costs of remediation and supervision resulting from the deficiencies on behalf of the banks. And while the number of advisers is decreasing, having now dipped below 20,000, the costs of advice are exponentially climbing.
“We’ve had all of the bank failures and everything that led up to the Hayne royal commission, so a lot of the remediation is still happening. However, we know that the banks have gotten rid of their wealth-creation arms and their financial planning arms, so you’ve got fewer advisers paying for these costs, but they’re paying for the costs that have arisen from the deficiencies of the banking sector,” Ms Stylianou said on a recent podcast episode of ifa’s sister brand, Accountants Daily.
She hinted that perhaps the government should be absorbing a chunk of these extra costs.
“It’s unfair that those who didn’t create that harm and weren’t responsible for those deficiencies, it’s unfair that they should now be paying for them,” Ms Stylianou added.
Levies have steadily been on the increase for a number of years, lifting by as much as 160 per cent in the last two years alone and 230 per cent in the last three years.
Prior to the government’s recent levy cut announcement, estimates for 2020–21 had advisers paying $3,138 on top of the minimum $1,500 per licensee fee.
Having looked closely into ASIC’s actual costs, Ms Stylianou noted that the corporate regulator needs to follow the lead set by others and strive towards reducing costs in every way it can.
She said: “This is where it comes down to accountability and transparency and also efficiency. So we’ve been saying to ASIC along, ‘why have costs been going up? Where are you driving efficiencies to reduce those costs?’
“That is a big part of it.”
Ultimately, she noted, the IPA has seen no serious evidence of ASIC trying to drive efficiency with the view to reducing its own costs.
If the Government chooses to regulate, it should pay the cost. User pays is only appropriate when I order the coffee and grt what I want.