In a report hailed as historic, the Senate economics references committee has called for a reduction in levies charged on various industry subsectors, including financial advice.
Committee chair Senator Andrew Bragg announced the 232-page report on Wednesday afternoon, declaring that the Australian Securities and Investments Commission (ASIC) “has failed” and highlighted 11 recommendations, the last of which is a reduction in levies charged to various subsectors.
Recommendation 11 reads:
The committee recommends that the Australian government reassess the funding arrangements for the Australian Securities and Investments Commission or any alternative regulatory authority so that:
This recommendation follows persistent lobbying by stakeholders in the financial advice profession, who have long argued that ASIC’s funding model lacks transparency and imposes undue fees on financial advisers, compromising their ability to provide quality financial services to consumers.
As noted in the report, the Stockbrokers and Investment Advisers Association (SIAA) submitted that levies charged on financial advisers under the Industry Funding Model (IFM) had increased exponentially since the model was first implemented.
The SIAA cited figures showing that levies for financial advisers under the IFM had increased by 246 per cent over the 2018–19 estimate, arguing that these levies do not accurately reflect the cost of regulating these firms and are inconsistent with the model’s design principles.
Similarly, the Financial Advice Association Australia (FAAA) has repeatedly expressed concerns, including before the Senate, that advisers may be paying for expenditures that shouldn’t be attributed to them.
“The numbers look wrong,” CEO Sarah Abood told the Senate last year.
At the time, she pointed out that ASIC had estimated expenditure of $18.2 million in 2022–23 on enforcement activity in advice, yet recoveries were only budgeted at $2.1 million.
"Financial advisers are funding litigation costs against large institutions when the fines are going to consolidated revenue, and advisers are left with a tiny fraction of these costs being recovered," Abood said.
For example, she noted, ASIC was successful in court against Westpac in April 2022, with $113 million in penalties being awarded in this single case (which included advice-related matters).
"What has happened to those penalties? Have they simply gone into consolidated revenue? If that is in fact the case – that financial advisers are funding ASIC action against these participants, and yet the government is keeping all the proceeds – then this breaches really fundamental principles of fairness and equity,” Abood said at the time.
In February, a petition was lodged with Parliament calling for licensees to bear more of the ASIC levy burden. The petition came as invoices for the ASIC levy began to land in advisers’ inboxes.
Licensees at the time said the fix that the petition proposed was misplaced, with Eugene Ardino, CEO of Lifespan Financial Planning, calling for a reduction in the levy to make advice more affordable and accessible to consumers.
But despite widespread adviser anger at both ASIC and the government over the exponential jump in the levy over the past year, and more broadly since 2019, Minister for Financial Services Stephen Jones told advisers in December that the ASIC levy is not a top priority for him.
Speaking at the Association of Independently Owned Financial Professionals’ (AIOFP) Canberra Conference, Jones said “We’ve got an industry funding model right across the board, not just for financial advisers.
“Is it perfect? No. Are there areas it might need to be polished up? Yes, there might be. Can we settle down on the stuff currently in front of the government?”
Unfortunately, despite six months passing since Jones made these remarks, neither the ASIC levy nor the legislation addressing the first stream of the government’s Quality of Advice response has been settled.
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