Rise in financial advice costs ‘distressing’: Parliamentary committee chair
The corporate regulator’s financial adviser levy has been called an “extraordinary sum” by a parliamentary committee.
The Association of Financial Advisers (AFA) told the committee about the impact of the Australian Securities and Investments Commission (ASIC) levy, including the increase from around $930 during the 2017-18 financial year to the projected $3,138 for the 2020-21 financial year.
Committee chair, liberal backbencher, Tim Wilson stated that it was an “extraordinary sum”.
The AFA said the costs flowed onto running the business and sat alongside other cost increases.
AFA acting chief executive, Phil Anderson, said: “Ultimately advisers need to recover costs and no doubt margins have been very much strained in recent times. Ultimately, cost to individual clients have gone up and advisers need to make decision on which clients they focus on. So, they’ve needed to push up their minimum fee to make sufficient revenue out of each client to cover their costs.
“The minimum fee you can take from a client each year has necessarily had to go up significantly and those clients either needed to accept increase in their fee or have chosen to leave their relationship with their adviser.”
Wilson replied and said: “One of the most distressing things that has happened as a consequence, not just the ASIC fee but the rise.
“The only people that can afford financial advice are frankly those who are already established, well off and the rich, and those who desperately need financial advice won’t be able to get it while the rich and the powerful will be able to get it and take advantage of it and only entrenches their position.”
AFA president, Michael Nowak, said greater scrutiny of reforms and legislation needed to be made along with engagement with the sector so that more costs were not driven up.
Liberal Jason Falinski questioned why the ASIC levy had increased due to increased enforcement action when there had been less financial advice going on and breaches of the law were “massively down”.
Anderson explained that the enforcement costs were carried over from the Royal Commission investigations and court actions taken on mostly large institutions that were not in the industry anymore.
“Well chair, I think it is clear that this committee needs to recommend to the parliament that many of the remaining Hayne Royal Commission recommendations will do nothing more than harm and damage ordinary Australian consumers,” Falinski said.
Also speaking to the committee, the AFA’s vice president Sam Perera said small business advisers with a handful of staff were paying around $100,000 in regulation and compliance costs to ASIC, the Tax Practitioners Board, their licensee, and professional indemnity.
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