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Advisers sceptical of levy decrease Karren Vergara
he annual financial adviser levy that continT ues to balloon and leave the industry infuriated could potentially decrease, the corporate watchdog has flagged – but many are not so optimistic and anticipate future hikes. ASIC calculates the new charges to be $1500 per licensee plus $2426 per adviser for the 201920 financial year. The fee, which is charged retrospectively based on ASIC’s enforcement activity, is a staggering 160% jump from the time it was introduced in 2017-18, adding more fuel to the fire of overheads eating away at advisers’ bottom line. ASIC deputy chair and commissioner Karen Chester acknowledged the significant uptick at a Parliamentary Joint Committee on Corporations and Financial Services in March, but ultimately blamed the increases to the “denominator effect” of advisers exiting the industry. The adviser population stood at 20,667 at March-end, according to ASIC’s Financial Adviser Register, marking an 11% drop year on year. In keeping the levy down, Chester hopes that adviser numbers will stabilise, but also hints that the “numerator should come down over time [in] several ways”. The hearing also found that ASIC typically recovers the costs incurred in prosecuting the major financial institutions and offsets these against the levy. The problem is that a massive lag exists between the time ASIC recoups such costs to the offset trickling down to the smaller players. “So, when we recover from the big end of town, the small end of town doesn’t see that coming off their bill until a couple of years later,” Chester said. The Financial Planning Association of Australia head of policy, strategy and innovation
Ben Marshan says there are “fundamental flaws” in the formula. “What’s disappointing is that over 50% of the costs relate to court action ASIC has taken against super trustees, and Evans Dixon [now E&P Financial Group] for example. These problems arose five-plus years ago. Now, professional financial planners are being asked to pay for ASIC’s legal work,” he says. The FPA is not opposed to an industry levy as such, as it applies across most professions and helps increase professionalism. The problem, Marshan says, is the legacy issues ASIC is taking so long to deal with. “There is a problem in the way the formula works – not that there is a levy in the first place. We want the levy restructured so that the right fee is charged to the right organisation.” Centrepoint Alliance group executive, advice Paul Cullen says: “The levy is one more thing that will increase the cost of advice and we are concerned that people who really need it are being marginalised as it is becoming even more expensive for them to obtain.” The licensee solutions provider, which immediately pays ASIC’s levy on behalf of clients, has given advisers three months to repay Centrepoint, extending the original one-month deadline to an additional two months in a bid to help them manage their cashflow. Cullen predicts numbers will continue to dwindle as some advisers he engages with have indicated they will not take the exams and are rethinking their future in the industry. Furthermore, he cannot foresee the levy going down this year. “Unless someone steps in and says, ‘we can move away from this formula’, we will probably see another increase next year,” he says. fs
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Annabelle Dickson
Karen Chester
deputy chair ASIC
Outstanding performance through the economic cycle Independently rated
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Life industry to launch framework
Market leading investment solutions $12 billion AUM
3 May 2021 | Volume 19 Number 08 www.financialstandard.com.au 20 January 2020 | Volume 18 Number 01
1800 818 818 | latrobefinancial.com
The life insurance industry is developing a Professional Standards Framework for all claims and underwriting professionals, with support from the Australian and New Zealand Institute of Insurance and Finance (ANZIIF). The framework is being developed in collaboration with AIA Australia, AMP Life, BT Life Insurance, ClearView, MLC Life Insurance, TAL and Zurich, who collectively hold 95% of written premiums, along with ANZIIF and formalises standards by implementing a consistent ‘Foundation’ requirement. By 2023, all claims professionals are expected to achieve four Certificate IV competencies including ethics; sustainability; products Continued on page 4
Investors rush to equity funds Calastone’s recently launched Fund Flow Index (FFI) for Australian managed funds, recorded $7 billion in flows to equity funds over the last 12 months, leaving equity income funds lagging behind. Over the first quarter of 2021 the FFI, which covers 95% of fund managers in Australia, recorded $3 billion in flows and half of which was in March. Investors currently prefer global and Australian equity funds with more capital going towards these in February and March than in all of 2019. “The preference for global and Australian equity funds reflects investor judgement that this country will join the global economic leaders as the pandemic comes to an end,” Calastone head of Australia and New Zealand Ross Fox said. Continued on page 4