Jones is widening the gap instead of fixing the ‘hot mess’

Earlier this week, Financial Services Minister Stephen Jones announced that the Australian Securities and Investments Commission (ASIC) levy freeze instated by the previous government would not be extended, signalling a significant increase in the costs charged to advisers.

A day later, that significant boost was indeed confirmed, with the corporate regulator revealing that to recoup the cost of regulating licensees that provide personal advice to retail clients, it will have to charge advisers $3,217 — on top of the minimum levy of $1,500 — instead of the $1,142 they had been charged under the freeze.

The total cost, ASIC said, is $55.5 million in 2022–23.

Advisers are understandably outraged, especially considering the government's professed objective of enhancing access to affordable advice. The prevailing consensus is that, to fund the levy, advisers will need to raise their fees even higher, rendering professional financial advice even more unattainable.

An added concern is that the advice industry has experienced a substantial contraction of over 40 per cent since 2019 — a clear sign that the industry is struggling, weighed down by the complex and costly regulatory burden.

And while Mr Jones declared, prior to Labor assuming government, that he is intent on fixing the “hot mess” that is the advice industry, it now seems that he is merely introducing an additional layer of hardship to an already fatigued cohort.

The comments from the ifa readership encompass a wide range of emotions, from shock and exhaustion to bitter resentment towards a government that is clearly competent at talking the talk, but less so at walking the walk.

“Yet more costs to pass on to clients, making advice ever less accessible for those who need it most,” said one reader.

Another added: “Government talks, talks, talks about being concerned about consumers who seek advice and the cost of advice ... their actions speak for itself. JOKE!”

While a third wrote: “I have been a financial adviser for nearly 20 years and a small practice operator. Like most advisers, I work honestly for clients in their best interest. We have done nothing wrong. Can anyone explain to us why we good guys get punished again for doing the right thing? Why do we have to foot the bill for someone’s faults? Why we are charged per head and not per amount of income?”

A longstanding argument among advisers has been that the ASIC levy is, in plain terms, unjust. The argument holds that while misconduct is often committed by unscrupulous, mostly unlicensed individuals, it is the honest, compliant, and law-abiding advisers who bear the brunt of the financial burden.

Moreover, advisers rightfully question the whereabouts of the exorbitant sums of money ASIC has collected from the banks.

The Financial Advice Association Australia (FAAA) joined the chorus of voices on Thursday.

Apart from branding the ASIC levy jump “extremely concerning”, FAAA chief executive officer Sarah Abood asked what happened to the millions collected from Westpac in April 2022.

Namely, in its latest Cost Recovery Implementation Statement, ASIC has estimated expenditure of $18.2 million in 2022–23 on enforcement activity in the financial advice sector, yet recoveries are only budgeted at $2.1 million.

Ms Abood argued that financial advisers appear to be funding litigation costs against large institutions while the fines end up in consolidated revenue.

“ASIC was successful in court against Westpac in April 2022, with $113 million in penalties being awarded in this single case,” said Ms Abood.

“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.”

These discrepancies also raised questions among our readers in the comments section on ifa. Some even openly admitted that they had no choice but to shut up shop, as they struggled to stay afloat amid the chaos and disorder.

One ifa reader wrote: “As an ex-practitioner at the very small end of financial advisory services, I had to leave. I felt I was paying ASIC and the government for their ineptitude. Because they failed to make good law, there have been so many changes and each change costs practitioners. Those of us not specialising in the planning side with limited licenses were ripped off the most. Same fees but with lower opportunity to provide service due to limited license. The past decade has been a prodigious exercise in futility. Now arriving back at a point where the rules have to be relaxed to encourage advisers back. Thanks, but NO thanks!”

Considering the flaws detected in the model used to calculate the levy, FAAA has now issued a demand for the government to “urgently reconsider” the removal of the freeze and warned that if it failed to do so, it is the Australian consumers that will ultimately bear the costs.

This is not the first time Mr Jones has disappointed the advice industry.

Namely, it took Mr Jones six months to announce the government’s response to the Quality of Advice Review, and when he finally did, he chose to do so in front of a small audience of superannuation fund CEOs and senior industry executives — a move considered a flick of the middle finger at advisers.

The response itself was quite underwhelming, with the minister announcing yet another round of consultations, even on straightforward recommendations such as the removal of statements of advice (SOAs) — a measure anticipated to bring substantial relief for advisers.

Once again, the minister failed to provide a specific timeline. As a result, it remains anyone’s guess as to when, or even if, SOAs will undergo any meaningful alteration.

So, the agony continues.

The minister hasn’t been very responsive to trade media, perhaps because he knows we’re the ones asking the tough questions. But, with the ASIC levy representing another slap in the face for advisers, we feel the need to rally the government to walk the walk and fix the “hot mess” that regulation alone has created.