The Financial Planning Association of Australia (FPA) has made six recommendations in its Budget Submission 2021-22 aimed at addressing the rapidly increasing cost of practicing as a financial planner.
FPA CEO Dante De Gori CFP® said making financial advice more affordable for all Australians starts with making financial planning more affordable to practise.
“This has been the focus of the FPA’s policy work over the past year and formed the foundation of our new policy platform – Affordable Advice, Sustainable Profession – which was released in June 2020,” Mr De Gori said.
“The voice of the FPA, its members and the profession is now being heard. With ASIC recently announcing a formal consultation on promoting access to affordable advice, the FPA has used its Budget Submission 2021-22 to tackle the key issues that should be addressed immediately by the Federal Government.”
ASIC levy ‘unpredictable’
The FPA recommends that the ASIC industry levy be reviewed to provide a more predictable annual levy and constraining year-on-year increases to better reflect the capacity of the financial planning profession to support regulatory costs.
While the FPA supports an industry-funded regulatory model, two major issues have become apparent since the levy was first applied in the 2017-2018 fiscal year.
“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.,” Mr De Gori said.
For the 2018-19 financial year ASIC predicted in March of 2019 that the per financial planner amount for the levy would be $907. By the time invoices for this year were issued in January 2020, the per financial planner amount had risen to $1142. This is a 26 per cent increase in just ten months.
Similarly, for the 2019-20 financial year ASIC predicted in March of 2020 that the per financial planner amount for the levy would be $1571.The FPA expects the amount will have risen further to around $2,000 – an increase of nearly a third.
Fewer financial planners to tax
“Secondly, the levy has been increasing at a dramatic rate that far outstrips the rate of revenue growth for most financial planning businesses and is being exacerbated by a reduction in the number of financial planners from whom the levy must be recovered, Mr De Gori said.
“The levy per financial planner has increased from $934 in 2017-18 to approximately $2,000 in 2019-20. In three years of operation, the levy for financial planners will likely have more than doubled and there is no indication that increases of this scale will cease for 2020-21 or future years.”
Over the 2019-20 financial year, the number of financial planners from which this budget must be recovered has fallen from around 25,600 to around 22,500 – a loss of 3,100.
“As a first step in addressing these twin challenges of predictability and dramatic levy increases the Government should undertake to review the ASIC industry levy,” Mr De Gori said.
“As it has been three years since the levy was first introduced, it would be an appropriate time to review its implementation and impact on the financial services sector.”
Mr De Gori said the review should consider whether the current method of recovering the entirety of ASIC costs relating to financial advice through the levy is appropriate, particularly given that much of the additional cost being recovered relates to specific enforcement action against a small number of financial services businesses.
“It should also consider whether the operation of the levy, and in particular its unpredictable increases, is having a negative impact on competition and the viability of financial planning businesses.”