ASIC throws hands up at levy

The summary of actual levies for the 2020 year revealed ASIC will charge a minimum levy of $1,500 per licensee that provides personal advice to retail clients, plus $2,426 per adviser – a significant rise on the $1,571 per adviser listed in the regulator’s cost recovery implementation statement in June 2020.

ASIC commissioner Danielle Press told a Senate estimates hearing on Thursday that there has been a 29 per cent rise year on year for the cost per adviser.

She added that the royal commission had resulted in increased action, running up costs, while a number of advisers had exited their industry. Those two factors have also combined with a “lag effect”.

“There is a lag effect in the industry funding model in that enforcement activity and cost is current this year. When we recover those enforcement costs, when we’re successful, they are then applied back to the levy in future years,” Ms Press told a Senate estimates hearing on Thursday.

“But there is a lag effect that we do understand is affecting advisers. Unfortunately though, the industry funding model – there is very little flexibility in what we can do to affect the one-year number.”

“Right, because the parameters for that are set by the government, not by ASIC,” Labor senator Jenny McAllister interjected.

“They’re set by legislation. That’s correct,” Ms Press answered.

Similarly, ASIC had told another parliamentary hearing the week prior that advisers will continue to pay heavy levies until costs can be recovered from the larger institutions. The timeline of enforcement actions against those organisations made it difficult to recover the money ahead of time, the regulator said.

But Liberal senator Slade Brockman stated he and his colleagues had been inundated by complaints from advisers.

“There’s a feeling in the advice industry that the banks and other large institutions that have left the financial advice industry effectively left the smaller players carrying the can and then they’ve seen their fees increase significantly,” Senator Brockman said to ASIC deputy chair Karen Chester.

“Is there anything that ASIC is looking at that can ameliorate the increase?”

Ms Chester responded, “Unfortunately, the way the model works is it’s very difficult to carve one piece out to another. We are very cognisant of the issue, but the industry funding model is mechanical and it has very little flexibility in what we can do to make any changes.

“We will look to recover the costs of litigation that we are taking against the large institutions, when we’re successful in that litigation and that enforcement activity. That will then be applied to the smaller advice licensees in the future, but unfortunately that time lag is a result of the model, not a result of anything we can actually do.”

Minister for Financial Services, Superannuation and the Digital Economy Jane Hume however rebutted the remarks from ASIC.

“This has been an area of the sector in particular that’s seen quite seismic change … structural change,” Ms Hume commented.

“But I think most importantly, the industry funding model that is imposed does have some level of flexibility and the discretion by ASIC as well.”

She also noted the 10 largest licensees providing personal advice have contributed a “steady share” of around 20 per cent of the total levies since the funding model had been implemented.

There will be a rolling review of cost recovery arrangements of the Treasury portfolio by the Department of Finance later in the year.