Deaf to adviser concerns, Federal Opposition waves through CSLR

Financial advisers’ calls for Parliamentarians to consider extending the funding of the Compensation Scheme of Last Resort (CSLR) to product manufacturers, particularly Managed Investment Schemes, have fallen on deaf ears.

The Parliamentary debate on the legislation underpinning the CSLR has seen the major parties united on the levy formula which will see financial advisers and credit providers doing almost all the heavy lifting.

Not one politician during the House of Representatives debate questioned the levy arrangements beyond taking comfort from the fact the banks and insurers would fund legacy claims associated with the CSLR regime.

While the opposition spokesman on Financial Services, Stuart Robert took the time to criticise the Assistant Treasurer, Stephen Jones over his handling of the legislation he nonetheless committed the Liberal/National Party Coalition to supporting passage of the bill.

As well, senior Coalition back-bencher and former chair of the Parliamentary Committee on Corporations and Financial Services, Andrew Wallace said that while he had reservations about the CSLR he would be supporting its passage.

“When I was the chair of the corporations and financial services committee I had some pretty grave reservations about the introduction of a compensation scheme of last resort, and quite frankly I still do,” Wallace said.

“We need to be very careful that government doesn’t just keep stepping in on all occasions saving people from themselves. Some people will make poor decisions. Some people will make poor decisions based on poor advice. What we need to be careful of in this country is that we don’t try and de-risk everything, because ultimately if we try and de-risk everything we demotivate the concept of investment.”

“Everybody would invest if there was no risk, but the likely rewards from those investments, in my view, are likely to be diminished as a result. And of course, we also have the costs of paying for the levies. Let’s not be naive about this, the levies that will be paid by the relevant institutions—ultimately, it’s the punters that’re going to pay for these things through increased charges,” Wallace said. “So, whilst I support the legislation, as does the Coalition, I just want to put it on the record that I have had concerns and I still have concerns about the concept of a compensation scheme of last resort.”

The Government whip, Anne Stanley said the funding aspect of the CSLR is another crucial element of these bills. The Commonwealth, on passage of these bills, will fund the operational costs from 23 December until 30 June 2024.

“But, importantly, the costs from 1 July 2024 will be fully funded by an industry levy, and the backlog claims will be funded through a one-off levy on the 10 largest banking and insurance companies in Australia. Taxpayers won’t be paying for it,” she said.