CSLR could cost advisers an extra $1,250
The proposed financial advice sector cap of $20 million applying to the Compensation Scheme of Last Resort (CSLR) could see levies in the future of over $1,250 per adviser, according to the Financial Planning Association (FPA).
In the wake of the Government reintroducing the legislation underpinning the CSLR, the FPA said it continued to hold reservations about the scheme and the associated legislation around the Financial Accountability Regime (FAR).
The FPA continues to hold reservations about the proposed Compensation Scheme of Last Resort (CSLR) and the Financial Accountability Regime (FAR) Legislation, introduced into Parliament yesterday.
“On the good side, an effective CSLR will promote trust in financial advice among consumers – by ensuring that if retail consumers have lost money due to poor advice, there is a compensation mechanism available,” FPA chief executive, Sarah Abood said.
“However, the legislation has not changed substantially from previous drafts, and many of the concerns we expressed previously remain.
“Firstly, we believe the scope of the scheme needs to be broader, to ensure that consumers are covered for the full range of matters considered by the Australian Financial Complaints Authority (AFCA), including managed investment schemes (MIS),” she said.
“We acknowledge that a review into the regulatory structure of MISs has been announced, and this is a positive step. We are particularly pleased that this review will include a look at the thresholds that determine whether an investor can be treated as ‘wholesale’ or ‘sophisticated’. However, this could take some time, while consumers remain unprotected from a major source of harm in the sector.”
“Another area of concern remains the ‘moral hazard’ in the complying, efficiently run businesses in our sector effectively having to underwrite the bad actors. We need to ensure there are strong disincentives for companies and their directors to resort to the scheme – otherwise we risk groups allowing their advice entities to go bankrupt (and the profession wearing the costs of consumer compensation), while the group and its directors continue their other profitable activities unscathed. The proposed remedy of cancelling the AFSL of a defaulting entity is little disincentive if it has already been made bankrupt. We would like to see enduring penalties for the related parties, directors and Responsible Managers of the entities resorting to the scheme.”
“We are also keen for the overdue review of professional indemnity insurance to be commenced. A properly functioning PI sector would substantially reduce the calls on a CSLR.”
“Finally, we are concerned about the costs this scheme will impose on our members. We’re very pleased to see that advisers will not be asked to fund compensation for past misdeeds at the outset – however the proposed sector cap of $20m could see levies in the future of over $1,250 per adviser at our current numbers. This is a significant impost on advisers who already face increased costs from the unfrozen ASIC levy, PI premiums and the general increased costs all businesses are facing in the current high inflation environment.”
“We will continue to work constructively with the Government, advisers, consumers and other stakeholders to help ensure the scheme can operate effectively and that consumers can have trust in financial advice,” Abood said.
Professional financial advice is unaffordable for most consumers due to regulatory overkill. Instead of fixing that problem, the govt imposes yet another regulatory cost slug on advisers which will just make the problem worse.
Advisers need to revolt !!!!!
Tell Jones to get stuffed.
Tell ASIC to get stuffed.
Tell Canberra to get stuffed.
Maybe we all on mass vote to stop work, cease to operate and refuse to pay double taxation ASIC levies and CSLR theft from good advisers.
Way past too much Govt BS.
I hear ya, believe me I do. Sadly, the chips are all stacked in THEIR favour. You see, unlike what we all like to teach our children, the government holds power over us day and night by the threat of violence. If you don’t pay your taxes, levies, whatever – eventually men with guns will come and forcibly take you to be locked up in a cage. Democracy – yep – that’s it. Our pathetic little voices will never wrest power from the self absorbed politicians who have the power to grant themselves hefty pay rises and benefits from our hard earned taxes. I’ve always said, governing a country is FAR, FAR too important to let those who want to be politicians anywhere near it. They are a blight on a thinking society. Politicians and government should just GET OUT OF THE WAY and let business owners get on with running the lifeblood of our country. They are nothing but an imposition and a real nuisance.
Adviser have PI insurance for this exact reason. This is simply revenue raising
Betchya this one doesn’t have it’s indexation frozen.
If they are going to impose extra costs on advice that the good advisers who have done nothing wrong are going to have to pay for the “bad apples”, then the cost has to be extended to MIS Schemes and anyone offering any form of advice (i.e. intra-fund advice providers & any “Johnny Come Lately” that wants to jump back into advice). The power granted to ASIC to cancel AFSL’s on non-payment of AFCA claim is also a joke, as they would have already gone broke. Action needs to be taken against the principals that run these businesses who have breached the rules
Exactly, like the crooks that ran Dixon’s, knew full well of the pending in house MIS disasters and sold their basket case onto the stock market, pocketing millions and running away with zero costs for their criminal disasters.
ASIC were warned about Dodgy Dixon’s for years and did nothing.
And ASIC even advertised for people to lodge AFCA claims knowing if they got into AFCA before that door closed, there would be no Dixon’s PI but they get 10’s of millions $$$$ from good Advisers from freaking CSLR.
Whilst Dixon’s Vertically Owned Advisers recommended these dodgy in house products, they also were forced too.
Ultimately this is case of multiple dodgy MIS’s collapsed and of course not directly in CSLR but will be covered under Dodgy Dixon Advisers, now moved sideways out of dead Dixon’s to another entity.
What a freaking scam !!!!!!
Thanks Dodgy Dixon’s
Thanks corrupt ASIC
Thanks Conflicted Jones
Disgusting all round.
The FPA has reservations. What is the mater with them; they should be firmly opposed. Everyone knows it is the product providers who cost consumers, yet they are not the ones expected to pay.
The FPA should have merged with the FSC rather than AFA.
so much for the shining light offered when Minister Jones was in opposition. he has just joined the gang