Is a ‘victory’ for Jones the last straw for advisers?

Forget the ASIC levy, advisers are now being asked to fork out an additional $1,186 to fund the CSLR scheme.

Let’s wind back the clock to June last year when Minister for Financial Services Stephen Jones announced that the ASIC levy freeze instated by the previous government would not be extended. Advisers were understandably outraged, especially considering the government’s professed objective to enhance access to affordable advice.

In the months since June, the government has been pushed on numerous occasions to rethink the ASIC levy – which currently stands at $2,818 per adviser – but to no avail.

The Financial Advice Association Australia (FAAA) and the Association of Independently Owned Financial Professionals (AIOFP) spoke the same language for probably the first time, encouraging the government to review the unfair system.

“We have decided to commence some lobbying on this levy issue due to the pain and anger this is causing many members, we have not seen this much frustration since the grandfathering revenue ban was announced,” AIOFP executive director Peter Johnston said in July.

The ASIC levy also occupied a considerable amount of time at Senate estimates over the months since June, with Senator Andrew Bragg recently asking Treasury officials whether the 150 per cent increase in the levy is conducive to more affordable advice. Needless to say, the Treasury officials deferred the questions in a style worthy of politicians with utmost loyalty to their party.

Despite profession-wide condemnation, the only time Jones has touched on the levy (to ifa’s knowledge) is at the AIOFP’s November Canberra conference where he said he has more pressing priorities to address before turning his attention to the levy.

“We’ve got an industry funding model right across the board, not just for financial advisers,” Jones said when asked by an AIOFP member whether he planned to tackle the escalating ASIC levy.

“Is it perfect? No. Are there areas it might need to be polished up? Yes, there might be,” the minister said at the time but added that he wanted to “settle on the stuff currently in front of the government” in a reference to the Quality of Advice Review.

And while the profession has been waiting for Jones to turn his attention to the levy, it’s been hit by yet another prejudicial cost that the advice associations believe could actually put firms out of business.

Let’s cast our mind back to June again, when Jones declared “victory” for victims of financial misconduct as the Compensation Scheme of Last Resort (CSLR) passed the Senate.

“This is a significant victory for over 2,000 people who have been waiting for a resolution on their cases,” the minister said, adding at the time that to ensure the scheme can commence as soon as possible, the government would fund the costs to establish the body to operate the scheme and the costs of the first levy period.

Well, as of this week, we now know that the cost of that first levy is $4.8 million. However, the estimated cost of the second levy – which the government won’t fund – is a much larger $24.1 million. And it came as no surprise that the majority of that $24.1 million would be charged to advisers – or $18.5 million.

Broken down, that sum will see each individual adviser hit by a $1,186 bill which will mostly be used to recoup the funds taken from individuals duped by Dixon Advisory.

According to the FAAA, this additional cost could drive advisers out of business.

“The CSLR is intended to promote trust and confidence in the financial services sector and in particular, financial advice. However, if advisers are driven out of business by rising costs, through being made to pay for the poor behaviour of those who left the sector years ago, there won’t be a financial advice sector left to have confidence in,” the CEO of the FAAA Sarah Abood said this week.

She added that coming as it does on top of an historically high ASIC levy, “this flies in the face of making advice more accessible and affordable for consumers”.

ifa wholeheartedly agrees with Abood that it’s “extremely concerning” that advisers are once again being asked to pay for the wrongdoings of a firm that has long been in administration.

If the government fails to respond to advisers this time around then a victory for Jones could truly equal the last straw for advisers.

Responding to ifa's request for comment on whether the minister feels this scheme is conducive to his goal to make advice more accessible and affordable, Minister Jones said: “The CSLR will further strengthen consumer trust and confidence in Australia’s financial system."

“The government has outlined a comprehensive package to make quality financial advice more accessible and affordable.

“Key to this is reducing red tape that adds to the cost of advice without providing a consumer benefit, and improving the pathways for new advisers to come into the industry to increase the number of financial advisers.”