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Paying the piper – how much you could have to pay for the FMA

[UPDATED] AFAs could face annual levies of up to $1,715 and RFAs $1,140 under proposals to fund the new Financial Markets Authority (FMA).

Friday, June 10th 2011, 4:28PM 14 Comments

by Benn Bathgate

A Financial Adviser Act levy on AFAs, RFAs, QFEs and the advisers they are responsible for is one of the options outlined in the Ministry of Economic Development discussion paper on funding the FMAs $26 million budget.

Other proposals include an FMA levy on either financial service providers and certain issuers, an FMA levy on all companies and other entities or a combined FAA/FMA levy on all companies and other entities.

When the Financial Advisers Act was passed, Cabinet decided that the associated regulatory work, which costs the FMA around $6.2 million per year, would be fully third party funded.

Fees are charged under the FAA for the authorisation of financial advisers and other direct services, and an FAA levy "will recover the portion of the appropriation that is not covered directly by the FAA fees revenue," the paper says.

The paper outlines a number of varied levy structures with differing levels of fees.

Under the one of the proposed FAA levy structures, charges of $680 will apply to AFAs not associated with a QFE, AFAs associated with a QFE and QFE Category One advisers.

QFEs will be charged $8,000, QFE Category Two advisers and RFAs $140.

The outline for a combined FAA/FMA levy - the preferred option - would see AFAs operating through a limited liability company charged $1,715, RFA sole traders $1,140 and QFEs $69,435.

The FMA proposals includes two options, the preferred option of a $910 levy for all financial service providers under the Financial Service Providers (Registration and Disputes Resolution) Act 2008, or a $20 levy on all companies, limited partnerships, building societies, credit unions, industrial and provident societies, friendly societies and contributory mortgage brokers.

The document says the fee levies was worked out after the March 31 registration deadline when numbers of AFAs and QFEs were better known.

In support of its levy assumptions, the paper approximates the number of AFAs as 720, AFAs associated with a QFE (1,180), RFAs (5,000), QFEs (75), QFE Advisers Category One (3,500) and QFE Advisers Category Two (20,000).

The document also outlines how product complexity was a guiding factor is setting the levies.

"The preferred basis for charging the FAA levy is either per adviser or per entity, and the amount of the levy is varied. Where the FAA levy is applied per adviser, the amount of the FAA levy reflects the regulatory costs relating to the risks associated with the complexity of the products advised upon, and not the organisational structure within which the individual is providing the advice."

Citing the "uncertainty inherent in introducing fees and levies to fund new Government services" the document says any fee and levy options arising from the proposals will be reviewed two years after implementation, "once the number of entities levied and the regulatory and operating changes have been more firmly established and their costs are clearer."


Benn Bathgate is a business reporter for ASSET and Good Returns, email story ideas to

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Comments from our readers

On 10 June 2011 at 5:04 pm Joseph said:
No problem my bank employer will pay this
On 10 June 2011 at 5:33 pm Mac said:
It would be interesting to know the break-down of how the FMA regulators intend to spend $6.2m our hard earned fees.
On 10 June 2011 at 6:28 pm 6ftndr said:
they will spend approx half on salaries and admin/technology - the other half will be spent out chasing and auditing advisers - perhaps after a while they could use some of the fines they recoup to offset their fees?
On 10 June 2011 at 7:53 pm wk said:
I hope that whoever do the assumption also take into consideration that when the fees thingy kicks in, there could be lesser RFAs, which means lesser fees to collect. So, AFAs, QFEs and the remaining RFAs will probably have a higher bill to foot to cover the short-fall. The ex-RFAs will either retire, work under a AFA/RFA (which make a lot of sense) or join a QFE.

Well, maybe I am wrong. With lesser advisors, there will be lesser audit to do, so some of these auditors could be made redundant, thus, lowering the cost of administering advisors.

Also, I stand corrected, before this whole regulation thing came into effect, it was also assumed that there will be something like 5000 AFAs? To-date, there are only 15%?

In conclusion, advisors just have to pay for somebody's mistake, pay someone to audit them, and be prepared to pay for whatever.....then transfer the costs to clients if you need to. Hopefully FMA will ask you to justify your fees charged to clients.

On 10 June 2011 at 9:23 pm Andy said:
I will happily run the whole organisation for half of the $6.2million!
In reality - it wasn't our fault that the FMA made a massive miscalculation on the projected number of respondents. Hang - I am sure that if I had made such a colossal error in the budget, and THEN tried to recoup my losses from my clients without having disclosed the fees beforehand, I would be up for a pretty hefty fine!
On 10 June 2011 at 11:27 pm Forthright said:
I was pleased to read the FMA boss has frozen spending on 3 expresso machines, free massages, free health checks and some free lunches for FMA staff, which were costing the FMA $60k p.a. The AFA fees of $1,715 per annum seem to be reasonable are in line with the cost of a cup of coffee a day.
On 11 June 2011 at 12:46 pm John Honest said:
Advisers having to fund the FMA has parallels with Auschwitz inmates being required to dig their own graves before being shot.
On 13 June 2011 at 9:05 am Malcolm said:
Where's the consistancy in regulation fees, Real Estate salesperson only pays $800 pa. in levies and AFA's are being asked to pay twice as much. Thank goodness, new FMA boss has taken away $60,000 in staff perks, so far.
On 13 June 2011 at 9:58 am gd said:
absolutely classic comment john honest, great laugh for a monday morning.
On 13 June 2011 at 10:01 am Johnny Adviser said:
Godwin's Law strikes again.

Excellent; anti-spam code was "take".
On 13 June 2011 at 10:07 am Peter said:
The Act is a political overreaction to media hysteria. I for one will never vote for a current Government or a sitting MP ever again.
On 13 June 2011 at 7:51 pm PM said:
In reading about the estimated numbers that can be levied I didn't realise that we were being asked to include all the Australian Advisers as well.
I have been doing some research to see what may be going on here. The Sunday Star Times gives me an indication. The employment agency company had a full page advert for just the key staff required to run this new Government Department. Here is a summary;
1) Head of Strategic Intelligence responsible for a team of around 12!
2) Head of Enforcement leading around 20 staff
3) Head of Primary Regulatory Operations leading around 35 staff
4) Head of Compliance Monitoring leading around 25 staff
5) Head of Stakeholder Management leading ' a small team'. Lets assume 5.
6) Head of Legal leading a small team. Lets assume 5.
7) Head of Business Performance leading around 20 staff.
Thats a total of 122 personnel. Add in large salaries, cars, entertainment falsh office space and you'll see where millions of dollars go. I will, watch with interest to see how all these personnel can keep themselves busy.I
On 13 June 2011 at 10:19 pm not again said:
Obviously those involved with this woefully inept example of planning, should undertake a special course of study concluding with an exam on the Consumer Guarantee Act. They should also submit a range of calculations and show that they had in fact modelled a range of costing including but not limited to cutting out free massages and cutting the staff numbers in half.
On 17 June 2011 at 3:28 pm Karl Rabinowitz said:
I'm appalled that John can compare the payment of a levy to the german genocide of my people.

Their ordeal should not be trivialised by anti semitic comments like these.

You should be ashamed of yourself
Commenting is closed



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