The consumer group Choice has slammed Australia's financial planning industry, calling it "dangerous for consumers," and is asking the Abbott government to stop cutting funding to the financial regulator - and start boosting it instead.
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Choice has used its pre-budget submission to remind the government that Australian consumers need "adequately resourced" regulators to protect their interests and to ensure they benefit from "genuinely competitive markets".
In a scathing description of the financial planning industry, Choice chief executive Alan Kirkland says too many companies have "proven dangerous to consumers" in recent years after billions of dollars have been lost in financial scandals and collapses.
He says financial regulator the Australian Securities and Investments Commission should be given more funding this budget - rather than less - if the government wants it to do its job properly.
He also wants the government to seriously consider ASIC's own call for a user-pays funding model.
It comes after ASIC's budget was reduced in 2014-15 by $120 million over four years, in addition to a so-called "efficiency dividend" of $47 million over the same period.
ASIC has previously made clear that cuts to its operating budget will result in substantially reduced surveillance of financial market and banking activities.
"Australia's financial planning industry reads like a scandal rap sheet – Commonwealth Bank, Storm Financial, Great Southern, Westpoint, Fincorp, Trio, Timbercorp – which makes it even more alarming that less than 2 per cent of financial advice licensees will be subject to proactive surveillance by ASIC," Mr Kirkland said.
"ASIC has made it clear that investigating financial advisers remains a top priority but limited resources only stretch so far."
"[It] has lost a number of experienced staff already and with further planned government funding reductions, the financial regulator expects to lose another 209 staff in 2014-15," he said.
ASIC spokesman Matthew Abbott responded to Choice's call for a funding boost on Friday by reiterating ASIC's desire for a different funding model.
But he did not say whether he supported Choice's call for a funding boost to pre-2013-14 levels.
"We note Choice's view and think that in a tough fiscal environment, it makes sense to have a funding model where those sectors that need the most regulation pay for it," Mr Abbott said.
"That is what we recommended to the Murray inquiry."
Choice's pre-budget submission, released on Friday, also wants the Abbott government to boost funding for the Australian Competition and Consumer Commission so it can increase staff levels to 2013-14 levels.
The ACCC oversees the competitive behaviour of companies such as Woolworths and Coles, and Caltex and Shell.
Choice also asks the government to make no further cuts to bodies with a mandate to protect consumers, such as the Australian Communications and Media Authority and Food Standards Australia and New Zealand.
Both the Financial System Inquiry and the Senate economic references committee have called for increased funding for ASIC through a user-pays model.
Choice says while the government considers adopting such a model it should increase ASIC's funding to pre-2013-14 levels, with particular consideration given to the funds necessary to restore staffing levels to its 2013-14 capacity and to conduct increased surveillance activity on Australia's financial markets.
