- Financial advising sector claims it's reeling from government costs and reforms
- Government announces levy freeze
- Freeze could stem exit of advisors from the sector
It’s been a challenging year for both seniors seeking financial advice and financial advisors alike. The recent Hayne Royal Commission uncovered fraudulent practices, resulting in government clamp downs, damaged reputation and new laws and regulations that threaten the business viability of the financial advice sector.
There’s been a significant exit from the industry leaving seniors searching for financial advisors and reeling as the spiralling costs of doing business gets passed on to them.
Responding to this, the Morrison Government has announced temporary relief for financial advisers by reducing the cost recovery levies charged by the Australian Securities and Investments Commission (ASIC).
Treasurer Josh Frydenberg said as the Hayne Royal Commission recommendations continue to be implemented, the reduction would help ensure access to affordable and professional financial advice.
The relief will see ASIC levies charged for personal advice to retail clients restored to their 2018-19 level of $1,142 per adviser for the next two years (2020-21 and 2021-22). The flat per-licensee charge will remain at $1,500.
This represents a substantial reduction relative to the level of $3,138 per adviser estimated in ASIC’s 2020-21 Cost Recovery Implementation Statement. The sub-sector as a whole will pay an estimated $46 million less in ASIC Levies in 2020-21 alone, with further savings flowing through in 2021-22.
The Australian Financial Review (AFR) reported that the changes would mean taxpayers would have to “pick up the tab for a $46 million discount
in lost revenue.”
Mr Frydenberg said the levy freeze provided financial advisers with the certainty they need over the next two years to deal with the impacts of COVID-19 and further regulatory reforms progressing through parliament (including the introduction of a Single Disciplinary Body and a Compensation Scheme of Last Resort).
But the AFR casts doubt on the freeze stemming the departure of advisors from the sector: “That situation is only likely to worsen, with the supply of registered financial advisers on track to be 50 per cent lower than before the Hayne Royal Commission in 2018 – 2,837 (financial advisors) exited the industry last year alone.”
The Association of Financial Advisers (AFA) welcomed the announcement, saying the proposed increase would have seen the ASIC Funding Levy per financial adviser increase by 200% in just over two years, from $1,142 in 2018/19 to an estimated $3,450 in 2020/21.
AFA National President Michael Nowak outlined the continuing pressures facing the sector including a requirement for practitioners to sit a compulsory FASEA Exam and meet other education standards to keep their livelihood, on top of an overwhelming volume of other regulatory reform, significant sectoral restructuring and the impacts of the COVID-19 crisis.
“It was unjustifiable to expect advisers already dealing with this tsunami of reforms to have to find extra cash to fund a trebling of the levy over two years to support an industry funding model requiring small businesses to pick up the cost of litigation against large institutions,” Mr Nowak said.
“This is a significant first step in starting to address the practical impact of the reforms on the ability of financial advisers to offer everyday Australians sound financial advice to give them financial security and independence."