Analysis by researcher Adviser Ratings, compiled for The Australian Financial Review, found the fee hike would add $1000 per year to the cost base of the average financial adviser, or $10 per client across an average client base of 100 investors. Additional administration costs associated with paying the levy may result in a total hit of up to $20 per client.
The levy of $3138, plus the estimated $300 associated with the Morrison government’s new compensation scheme, was equivalent to 1½ times the average monthly rent paid by consumers in Sydney, Australia’s most expensive city, said Adviser Ratings CEO Angus Woods.
“That’s a lot when the average planner earns a pre-tax income of $130,000,” he said. Many advisers are likely to wear the increase just to maintain a good relationship with their clients [and] also retain their clients.”
Making financial advice more affordable starts with making financial planning more affordable to practise.
— Dante De Gori, Financial Planning Association
Adviser Ratings data shows median financial advice fees rose by 16 per cent last year to $3256, while the number of advised Australians fell from 12.2 per cent to 11.2 per cent – a development both sides of politics and the regulator itself have decried as an “affordability crisis” for regular consumers.
But while the researcher predicted some wealth management firms will absorb the costs of the additional levy, others were concerned that the fee hike would necessarily be passed on to consumers.
“Advice practices have limited scope to absorb these increased input costs, and therefore the cost of advice to individuals will rise to reflect all this,” said Simon Hoyle of research house CoreData.
His research suggested that only one-third of advice practices believe current operating conditions are good (30.4 per cent ) or excellent (3 per cent), while two-thirds of advisers have increased fees for initial advice in the past 12 months. One-third of advice clients surveyed by CoreData believed they were getting good value for money.
Financial Planning Association chief executive Dante De Gori said the ASIC levy had blown out by more than 340 per cent over the past four years and was on an “unsustainable trajectory” for his members. He predicted that some firms would be forced to shut their doors.
“In light of extended lockdowns across the nation, the FPA questions the validity and timing of the increase, with millions of Australians unable to work and some businesses struggling to keep staff employed,” Mr De Gori said. “Making financial advice more affordable for all Australians starts with making financial planning more affordable to practise.”
The lobbyist took aim at ASIC for its “unpredictable” allocation of the levies, pointing out that least year’s estimate provided by the watchdog was 54 per cent lower than the final cost.
The year-on-year rise in the levy since inception vastly surpassed the average rate of revenue growth for financial advice firms, he said.
Judith Fox of the Stockbrokers and Financial Advisers Association said: “We call on the government to urgently review the ASIC levy model and make it more granular and risk based to more accurately reflect the firms that are generating the enforcement and supervisory work.”
ASIC chairman Joe Longo said in June that reducing the cost of financial advice for consumers was a top priority. The regulator has received more than 400 submissions from consumer and industry groups on the topic of removing barriers to entry.