In June, the government announced the end of a two-year freeze on ASIC levy increases for the financial advice industry. The levy, which recovers the cost of enforcement and surveillance activities in the advice sector, was previously frozen after increases of more than 30 per cent per year saw it labelled as ‘unsustainable’ by a number of industry associations.1
Soon after, the corporate regulator released an estimate of levies for the 2023 financial year which revealed another more than 30 per cent increase from last year’s fees. Below, we detail how the new costs have been calculated, how the industry has responded and what is likely to happen next.
FY23 levy costs
ASIC released its Cost Recovery Implementation Statement (CRIS) for the 2023 financial year on 28 June, which estimates the costs of its activities across each sector of the financial services industry. ASIC estimated the total cost to regulate the advice sector in FY23 was $58.42 million, with $55.52 million coming from licensees that provide personal advice to retail clients on financial products.2
The CRIS is an initial estimate of industry levies for the previous financial year, with the finalised amount to be published in December and invoiced between January and March 2024.3 It estimates that the charges for personal advice licensees will be $3,217 per adviser plus a $1,500 flat fee per licensee.
The cost is significant given that it is higher than the estimated levy of $3,138 per adviser for the 2021 financial year, which triggered the original freeze in levy increases by the then Coalition government. After the per-adviser costs for industry funding more than tripled over three years, the levy was frozen at its 2018/19 level of $1,142 per adviser to provide “temporary and targeted” relief for the industry.4
But after a review of the industry funding model found ASIC’s current method of cost recovery was still the most efficient, it was announced that the freeze would end. The review suggested if the freeze had not been in place, licensees would have been charged $2,971 per adviser in FY21 and $3,021 per adviser in FY22. 5
What happens now?
Financial Services Minister Stephen Jones has said that the four sub-sectors that fall within the financial advice sector in ASIC’s funding model may be reviewed alongside other legislative changes as part of the government’s Delivering Better Financial Outcomes package.
He also suggested “refinements” could be made to the model as recommended by the review. These include spreading the cost of some regulatory activities either across a wider population or over time, and enhancing ASIC’s reporting, transparency and consultation arrangements around industry funding.6
Industry associations have reacted with concern to the increase, with SMSF Association chief executive Peter Burgess saying the costs are “not sustainable” and need a rethink.
“What the sector needs now is a period of stability to retain existing advisers, the resolution of the QAR recommendations and a review of the education and entry pathways to ensure a healthy, sustainable sector – not a hefty fee increase,” Mr Burgess said.7
The Financial Advice Association of Australia has also called on the government to reinstate the levy freeze, saying it is “extremely concerned” by the impact the additional costs will have on the sector.8
“We continue to engage intensively on this matter, as we believe that even under the current industry funding model – which we know has flaws – there could be ASIC costs that have incorrectly been attributed to our sector,” FAAA chief executive Sarah Abood said.9
1 ASIC levy increase unsustainable. Self Managed Super, 26 July 2021
2 A summary of ASIC’s 2022-2023 regulatory costs and estimated levies for subsectors. ASIC, 28 June 2023
4 Temporary and targeted relief on ASIC levies for financial advisers. The Hon Josh Frydenberg MP, 30 August 2021
5 Review of the Australian Securities and Investments Commission Industry Funding Model Final Report, p37. Treasury, June 2023
6 Review of the ASIC Industry Funding Model. The Hon Stephen Jones MP, 26 June 2023
7 ASIC levy fee increase a heavy blow for advisers. SMSF Association, 30 June 2023
8 FAAA extremely concerned by drastic and unfair increase in estimated ASIC levy. Financial Advice Association Australia, 29 June 2023
9 Advisers push minister on ASIC levy. Professional Planner, 13 July 2023