The Life Insurance Customer Group (LICG) has come out against the government’s proposed industry funding model for ASIC, saying it pushes an “unreasonable impost” on small practices and will increase the cost of advice.
Last month, the government released a proposals paper for a new ASIC funding model, which shows the advice sector will be levied $24 million to refund the regulator, or $960 per financial adviser per year.
In an email yesterday, the LICG urged advisers to write to Treasury and warn that this extra cost will ultimately be borne by clients.
“This is a further and unreasonable impost on small business owners who are already coping with increased compliance, employment, educational costs [as well as] professional indemnity insurance and the significant impact of LIF reforms,” the LICG said.
“The cost will have to be passed on to the consumer – once again making advice more expensive. Large institutions will barely be impacted whilst small business owners and advisers will be directly impacted.”
The LICG also argued that this levy will essentially be penalising small licensees for the behaviour of larger institutions.
“ASIC has consistently stated that financial advice should be made more accessible to consumers,” the LICG said.
“The increased costs being proposed will have the opposite effect.”
The Governance Institute of Australia also released a statement yesterday arguing that the model is not likely to encourage good conduct as it punishes the wrong entities.
According to the proposals paper, ASIC will charge publicly listed companies a levy that is based on their market capitalisation, as it reflects “the quantum of potential investor harm from any misconduct”.
However, the Governance Institute believes this will only lead to well-behaving companies subsidising those that exhibit poor behaviour.
“Because it is predicted on size alone, with no risk-weighting attached to the market capitalisation metric, the proposed model inevitably means that listed entities that have little interaction with ASIC will face significant levies based purely on their capacity to pay,” said Governance Institute chief executive Steven Burrell.
“If we want to encourage and reward good corporate behaviour, costs should be borne by those creating the need for regulatory oversight and activity.