Response to ASIC’s cost recovery implementation statement 2020-21
The latest ASIC estimated industry funding levy for financial planners reinforces the FPA’s position that the current formula for the levy is not equitable or sustainable, and must be reviewed immediately before more financial planning practices are forced to close.
The ASIC industry levy for financial planners has gone up over 340 per cent in the last four years and is on an unsustainable trajectory.
In light of extended lockdowns across the nation, the FPA questions the validity and timing of the increase, with millions of Australians unable to work and some businesses struggling to keep staff employed.
The FPA strongly recommends that the ASIC industry levy be reviewed immediately to provide a more equitable and predictable annual levy, and for the year-on-year increases to better reflect the capacity of the financial planning profession.
Fixing an unpredictable and aggressive levy
While the FPA acknowledges the need for an industry-funded regulatory model, two major issues have become apparent since the levy was first applied in the 2017-2018 fiscal year.
Firstly, the levy amount each year has proved to be unpredictable, which makes it practically impossible for a financial planner to effectively budget for this business cost, particularly by a profession that is dominated by small and medium-sized businesses.
This year, the estimate is $1500 + $3183, a further increase of 31% from last year. The FPA notes last year’s estimate was wrong by 54% (i.e. between the CRIS and the final) so the actual levy figure could be significantly higher.
Secondly, the levy has been increasing at a dramatic rate that far surpasses the rate of revenue growth for most financial planning businesses, or increases to ASIC’s budget. This is being compounded as the number of registered financial planners in Australia have continued to decline, from whom the levy must be recovered.
As a first step in addressing these challenges of predictability and dramatic levy increases, we call for the Government to urgently and immediately undertake a review of the ASIC industry levy.
It has been four years since the levy was first introduced, and it is now critical to review its implementation and impact on the financial services sector. Making financial advice more affordable for all Australians starts with making financial planning more affordable to practice.