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The Financial Planning Association of Australia (FPA) has announced it will respond to the Government’s consultation paper on the proposed industry funding model for ASIC, cautioning that any changes to ASIC’s funding must strike a balance and not lead to increased cost of financial advice for consumers.
“In so doing, we will highlight that transitioning to a user-pays model, in whole or in part, requires that the cost of regulation is borne in an equitable, risk-based manner across the entire financial services sector,” said Mark Rantall, CEO of the FPA.
The consultation paper, released last Friday, forms part of the Government’s consideration of findings of the Financial System Inquiry (FSI), which recommended that ASIC’s regulatory activities be funded by industry.
“The FPA’s submissions to the FSI called for significant reform of the conceptual and legal framework in which Australian regulators operate,” explained Mr Rantall.
“The FSI recommended that the Government introduce an industry funding model for ASIC and provide ASIC with stronger regulatory tools. In our final submission to the FSI, we supported an industry funding model as a way to align the interests of ASIC and the financial services sector.
“Our call for greater collaboration and co-regulation between regulators and the financial services sector included closer alignment of the goals and mechanisms of regulators and industry.”
Mr Rantall cited the recent transition of AUSTRAC’s funding to a user-pays model as an excellent example of an equitable model, as it requires providers of designated services to pay according to their size and the complexity involved in regulating them.
He said that although supportive of the need for an appropriately funded regulator, the FPA cautions against extreme fees and levies being imposed on financial planning businesses. He pointed out that the consultation paper estimates a small self-licensed financial planning business will be subject to costs of greater than $6,000 per annum, not including the 1,200% proposed increase in application costs to become an AFSL holder to $11,000.
“If this is to be the case, the Government must also consider the potential flow-on impact of increased costs of financial advice for consumers – especially at a time when the industry is already facing significant new costs relating to complying with other regulatory requirements,” said Mr Rantall.
According to the Rice Warner report into the financial advice industry post FoFA in July 2013, the costs of FoFA implementation are assumed to be as high as $700 million, with ongoing costs up to $375 million. These do no factor in additional levies and fees to support the role of the regulator.
“The FPA will be responding to the consultation paper and will engage with industry and financial planning practices to better understand the cost imposed to their businesses under the proposed funding model. We will also be looking into whether there are better alternatives, said Mr Rantall.
“The FPA believes that any funding model proposed should also deliver to consumers and industry greater responsibility, accountability and transparency on the part the regulator.
“If this is indeed the outcome, we will have a level of assurance that the fees and levies charged are appropriate.”