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Levy change could mean more cost for clients

There's a smaller bill coming for AFAs but some DIMS providers are warning their clients may be left to pick up the tab.

Monday, June 26th 2017, 6:00AM

by Susan Edmunds

New levies to fund the Financial Markets Authority take effect at the end of this week.

The FMA introduced a new plan last year to raise almost an extra $10 million a year from market participants.

It said it needed to adjust its funding because the $28.7m it currently gets from a combination of Government funding and industry levies is no longer enough.

Without more money, from next month it would strike significant trouble.

It had originally been suggested that under the enhanced funding case, which has now been adopted, AFAs could have their annual levy increased from $348 to $520.

Instead, AFAs will have their levy drop to $330.

DIMS providers, both class and personal, are set for a bigger levy increase. At present, they pay either $304 a year or, for those who have a class license, $1739 in levies.

As of the end of this week, they will all come under the same levy structure.

Those who have FUM under $50 million will now pay $950, those between $50m and $100m will pay $2400 and those $100m to $500m will pay $4800.

Previously, it had been suggested those with FUM under $100m would pay $6500 in the enhanced case, between $100 m and $250m $13,000 and above that $38,000.

DIMS providers submitted that the proposed changes were unfair and would make their business operations unsustainable, forcing businesses out of the market.

The biggest DIMS providers will now have to pay $36,000 a year nut that does not kick in until they have $2 billion under management.

Tim Fairbrother, of Rival Wealth, said the increased cost his business would incur would fall on its 110 DIMS clients.

"The FMA want more advisers and more Kiwis getting advice, yet they are putting in prohibitive costs for DIMS smaller businesses. They researched our process and charged us for our original licence, so there seems to be some confusion over what the ongoing levy will cover. We are not an Australasian mega bank."

Another provider, Wayne Ross of Newton Ross,  said there were no changes required for his firm since it had already moved to the DIMS license structure.  "The levy is higher but there is little we can do about that so at this stage we will be covering the increase rather than passing it on to clients, which might become a necessary reality in future."

Fred Dodds, chief executive of the IFA, said one-man-band advisers would expect more compliance obligations as the new regime came into play.

"I am sure we are going to see a growing number of 'Camp Mother' businesses which will offer a safe harbour for a large part of the compliance process for advisers. Even now some of these businesses are positioning themselves for that role and are staffing up accordingly."

Tags: DIMS

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