Labor Delivers Another Blow to Financial Advice

Australians need to have access to quality and affordable financial advice.

But Labor’s decision to increase levies on financial advisers, supported by corporate cop ASIC, will make it harder for Australians to access financial advice.

These levies have risen from $1100 to $3200 per financial adviser each year.

In total, the new levy on financial advisers will raise an estimated $55.5m in the 2022-23 financial year.

With more Australians being strained by cost-of-living pressures, we should be doing everything to increase accessibility to high quality financial advice.

There are two points to make about this new levy.

First, raising the levy on financial advisers will hurt small businesses.

Each licensed financial adviser is required to work for an entity with an Australian Financial Services (AFS) licence.

As of writing, there are currently 16,019 licensed financial advisers and 2655 AFS licence firms in Australia. This means that on average each AFS licence covers six financial advisers.

We are rapidly going backwards. Five years ago there were 22,769 licensed advisers and 2985 licensed firms.

Though an average, this demonstrates that financial advisers are predominantly either small business owners, or are employed by small businesses.

Simple economics dictates that these advisers will be forced to pass on the increased costs onto their clients. So much was confirmed by the Stockbrokers and Investment Advisers Association as part of the Senate’s ASIC Inquiry.

According to the Stockbrokers and Investment Advisers Association, “To the extent that members were able to pass through any of the costs, the model would make the cost of advice more expensive”.

This limits “the extent to which retail investors are able to access financial advice that is affordable and is suited to their needs”.

Increasing these levies will not only deter Australians from accessing financial

advice, they will hurt small businesses. These are both problems individually, but in combination the increased levies will have unintended consequences. This would be shambolic, given that there is no basis for ASIC to raise these levies.

Second, the new tax makes a bad situation much worse.

Labor could have intervened to stop this tax but they refused. It builds on their failure to move on the Levy review on financial advice.

The Quality of Advice Review, run by Michelle Levy, recommended abolishing the burdensome Statement of Advice and an overhaul of fee consent obligations.

Furthermore, Levy recommended that unnecessary red tape be removed and that documentary and disclosure requirements be simplified to help reduce the soaring cost of advice.

However, instead of implementing these reforms, the government decided to embark on another consultation, and has since proposed a vague reform road map that will only half implement the recommendations over an undefined time-frame.

Labor is not committed to reducing the cost of financial advice, and their inaction speaks for itself.

Predictably, Financial Services Minister Stephen Jones has said that Labor will let their mates at the super funds provide advice, but not other sectors. Meanwhile, they are letting ASIC fleece financial advisers at exorbitant rates.

Last month in the Senate, I asked the Finance Minister, Katy Gallagher, why Labor is allowing ASIC to squeeze small businesses with these increased levies.

In response, Gallagher told me in the Senate that: “The funding in that part of ASIC is that it is essentially self-funding.”

What the minister is saying here is that these increased fees are necessary for ASIC’s funding.

In the 2022-23 financial year, ASIC received approximately $352m in industry funding, and $635m in government funding. With this much funding, one would expect ASIC’s enforcement rates to be increasing. But the reality is that they are decreasing.

The minister and the Labor Party know ASIC is a failed organisation that cannot undertake its sole function – to enforce our corporate laws. But Labor is doing nothing to fix it.

In essence, ASIC doesn’t have a funding issue, it has an enforcement issue.

Labor is delusional if they truly believe these increased levies will move the dial on ASIC’s enforcement actions.

Our Senate inquiry into ASIC’s performance has uncovered extensive cultural and governance issues at the corporate regulator. What we’ve heard so far demonstrates that no amount of funding can fix ASIC’s cultural problems.

While the Senate has been attempting to place some sunshine on these deficiencies,

Labor has been running a protection racket for ASIC.

Whether this is inadvertent or not is irrelevant. Labor has acted on the direction of ASIC to block our requests for information in the Senate.

Now, Labor has taken the same approach when it comes to levies. Doing so will hurt small business owners and limit access to financial advice.

Labor should be helping Australians get more help with their finances during the cost of living crisis. Instead they are increasing costs on small business and blocking access to good financial advice.

Andrew Bragg is a Liberal senator for NSW.