Personal advice fees cut to help finance sector

Levies on financial advisers to cover Australian Securities and Investments Commission costs will be slashed by almost $2000 under a federal government plan to take pressure off the sector due to the coronavirus pandemic.

Treasurer Josh Frydenberg on Monday said ASIC levies charged for personal advice to retail clients will be reduced to $1142 per adviser for the 2020-21 and 2021-22 financial years in what he described as “targeted” relief.

Levies for personal financial advice will be slashed for at least two years to deal with the impact of the pandemic.Credit:iStock

Advisers were facing a levy of $3138 for 2020-21 alone.

Mr Frydenberg said the move would reduce levies by $46 million for 2020-21 with a larger saving for this financial year.

“Through our efforts, the Morrison government is easing cost pressures on financial advisers at a time when they need it most, while ensuring Australians have access to more affordable system,” he said.

Apart from the reduction in the levy, Treasury will review ASIC’s industry funding model to look at possible structural changes across the industry after the pandemic and the banking royal commission. That review will start next year.

ASIC recoups some of its costs from its regulated industry under a model introduced in July 2017. Levies range from 90 per cent of regulatory costs to 10 per cent, depending on the affected financial sector.

Total fees collected by ASIC have risen sharply, from $276.7 million in 2018-19 to an estimated $360 million last financial year. Fees covering personal advice have almost trebled to $71.4 million.

The increase in fees has been driven by extra funding to ASIC to implement recommendations of the banking royal commission. The corporate regulator has sharply increased spending on supervision and enforcement across the sector.

Some of those enforcement costs relate to action taken by ASIC against the nation’s large banks and AMP. The banks have largely left the financial advice sector, leaving those remaining to cover the cost of the regulator’s legal action.

The reduction in fees will not only help the sector deal with COVID-19 but also banking commission-related changes including the creation of a single disciplinary body and a compensation scheme of last resort.

The foregone fees will be another hit to the federal budget which was forecast to show a deficit of $106.6 billion. Last week, ANZ economists said lockdowns across NSW, Victoria and the ACT would blow out the deficit by between $25 billion and $35 billion.

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Shane is a senior economics correspondent for The Age and The Sydney Morning Herald.

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