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Frydenberg Announces Probe Into ASIC Industry Funding Model

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30 August 2021 by Ronald Mizen, Australian Financial Review

Article link: https://www.afr.com/politics/federal/frydenberg-announces-probe-into-asic-industry-funding-model-20210829-p58mv4

The corporate watchdog’s industry funding model will be reviewed to ensure it remains fit for purpose following a 50 per cent increase in the burden on business in the past three years.Taxpayers will also pick up the tab for a $46 million discount on industry levies paid by financial advisers, which the government said was to ensure retail investors were not priced out of the market.

“The Morrison government is committed to ensuring Australians have access to affordable and professional financial advice,” Treasurer Josh Frydenberg said.

Treasurer Josh Frydenberg will announce a review of ASIC industry funding model on Monday. Alex Ellinghausen. Under the industry funding model, most of the Australian Securities and Investments Commission’s regulatory costs are apportioned and billed-back to regulated entities at the end of the financial year.Industry funding was a key recommendation of the 2014 Murray Financial System Inquiry. But implementing the findings of the Hayne Financial Services Royal Commission has pushed costs higher.

In 2017-18, the first year of the regime, the expense passed on to business was $237 million. The estimate for 2020-21 is $360 million, a 50 per cent or $123 million increase in three years.Of the 51 sectors overseen by ASIC, 16 have had their levy increased by up to $5 million and seven had costs rise more than that.A significant portion of the overall increase came from the levy on financial advisers, which was on track to rise from $25.6 million in 2017-18 to $71.4 million in 2020-21, a 179 per cent, or near $46 million rise.Exits or major divestments from the personal financial advice sector by the big four banks also reduced the pool of payers, and meant the per-adviser levy was forecast to hit $3,138, up from $930 in 2017-18.

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 2018-2837 exited the industry last year alone. The levy is in addition to the $1500 annual license charge for privilege of being regulated by ASIC under the industry funding model.

Analysis by Adviser Ratings, compiled for The Australian Financial Review, found the hike would add $1000 per year to the cost base of the average financial adviser, or $10 per client across a client base of 100 investors.But a 63 per cent discount to be announced by the government on Monday will restore the levies for personal advice to retail clients to 2018-19 levels or about $1142 for this and the prior financial year.

The cost to taxpayers will be $46 million, which will appear in the December mid-year economic and fiscal update.The move comes ahead of the introduction of royal commission measures: the Single Disciplinary Body and the Compensation Scheme of Last Resort, both of which will add further to costs.“The freeze in the per adviser levy will provide financial advisers with the certainty they need over the next two years to deal with the impacts of COVID-19,” Mr Frydenberg said.

At his first Senate estimates appearance in June, new ASIC chairman Joe Longo adopted the government’s “business-friendly” rhetoric, saying he would make it a priority to address the over-regulation of financial advisers.Financial Services Minister Senator Jane Hume said the cost imposed by the ASIC levy was one of the main concerns raised by the sector.

“For so many Australians, considered advice from a professional and experienced adviser was what helped them through the worst of the COVID-induced recession,” Senator Hume said. The review into industry funding model will commence in 2022.

 

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