The life insurance industry and financial planners will face greater scrutiny as the Australian Securities and Investments Commission (ASIC) gains more funding.

The Federal Government has allocated $57 million to enable increased surveillance of financial advice, life insurance and breach reporting. 

ASIC Chairman Greg Medcraft has welcomed the move.

“This will enable further surveillance and enforcement in areas such as financial planning, life insurance, misconduct and breach reporting,” he said. “It will also allow us to build our technological capacity to identify and assess risks and misconduct.”

What shape the extra scrutiny will take is unknown at present. But under the stalled Life Insurance Framework legislation, ASIC was to gain powers to force life insurers to hand over policy renewal data, under a crackdown on churning.

It has been a few years since ASIC conducted a shadow shopper survey on financial advisers, so another is probably on the cards in the next year.

The Federal Government has also moved to make parties investigated by ASIC pay for the cost of inquiries.

Association of Financial Advisers CEO Brad Fox has concerns about this step.

“The proposal for ASIC’s costs to be recovered from all sectors of financial services is appropriate in theory,” he said. “However, the detail will be exceptionally important.

“The cost impacts of this model need to be considered in light of accessibility and affordability of financial advice, and [effects] upon competition in the marketplace between institutionally owned financial advice and advice provided by a... small business financial adviser.”

Financial Planning Association (FPA) CEO Dante De Gori supports the user-pays model for investigations, but has some reservations.

“The proposed user-pays model provides in principle a sensible long-term solution to the financial security of the regulator,” he said. “However, the FPA is keen to better understand the model and how it will ensure equity and fairness for small business operators.

“In particular, the funding model must not stifle competition or prohibit future entrants into the financial services industry.”

The FPA wants an exemption to the user-pays model for small business operators, similar to the one for anti-money laundering regulations.