Independent expertise needed to check AFCA Dixon rulings
The Compensation Scheme of Last Resort (CSLR) legislation has a loophole that is creating a moral hazard which, in turn, is making the CSLR an unsustainable liability for the advice community, according to the Stockbrokers and Investments Advisers Association (SIAA).
What is more, the SIAA is urging that an independent expert be appointed to review the Australian Financial Complaints Authority’s (AFCA’s) methodology and calculation of client losses related to Dixon Advisory in circumstances where it believes AFCA’s approach has been inappropriate.
Further, the SIAA said it believes the Federal Government needs to fulfil its promise to fund 12 months of CSLR claims.
Referring to the collapse of Dixon Advisory, and the existence of a loophole the SIAA says insolvency laws which were set up for a proper purpose have resulted in a listed entity with a subsidiary, placing the subsidiary into administration.
“As a result, any determinations arising from complaints lodged with the Australian Financial Complaints Authority (AFCA) are unable to be paid by the subsidiary and are referred to the CSLR. The financial advice profession then has to cover the compensation costs,” the SIAA has told the Senate Economics References Committee inquiry into Wealth Management Firms.
“The current CSLR legislation does not allow either advisers or firms to manage risk. The moral hazard we pointed to when consultation took place on the establishment of the CSLR is now evident from the very start of the scheme. It is inequitable and unsustainable. Mandating that sound financial services businesses fund consumer compensation for those businesses which have failed is moral hazard writ large. “
“The advice sector has seen the terrible consequences of poor public policy unfold before. The FASEA debacle had to be unwound and continues to need to be unwound simply to ensure that the number of advisers in Australia does not dwindle to almost zero at a time when Australians need access to financial advice more than ever before.”
“The ballooning and unsustainable costs passed to the financial advice profession under the CSLR will see more advisers quit, fewer be attracted to the profession and the numbers available to assist Australians in need of financial advice continue to decline. Australians deserve public policy that assists them to obtain financial advice. However, the costs of the CSLR will inevitably be passed onto consumers thereby increasing the costs of that advice and making advice less accessible,” the SIAA said.
Pollies & Bureaucrats Compo Scheme.
Let’s have the Canberra buffoons all pay for their “industry” disasters.
Robo debt cost $1 billion in compo, that our wonderful Canberra buffoons cost us all as tax payers.
Why aren’t the Pollies & Bureaucrats that stuffed that up made to pay compo.
Canberra is a wonderful place.
Yes it is. Populated by people, the majority of whom, have nothing to do with the matter being discussed. So maybe stop bashing Canberra & stick to Pollies & Bureaucrats.
“The advice sector has seen the terrible consequences of poor public policy unfold before.”
That statement pretty well sums up the last 15 years. Both Labor and Liberal have implemented badly flawed policies, as kneejerk responses to media exaggeration and misrepresentation. Most consumers are worse off as a result.
Accountants and Lawyers should have to contribute to the CSLR seeing most of the complaints for the CSLR relate to SMSF which their profession setups Accountants set up the SMSF, Lawyers setup the Bare Trust and all the companies of these financial companies that go bust all get advice from lawyers and accountants time for them to start contributing to the CSLR