It’s too complicated to make advisers alone pay
ANALYSIS
If the current workings of the Compensation Scheme of Last Resort (CSLR) regime are allowed to play out, then financial advisers can expect to be hit with ongoing special levies to meet successive blow-outs in the sub-sector cap resulting from the Shield and First Guardian collapses.
Whether this actually occurs, depends entirely upon the attitude of the Federal Government and consequent approach decided by the Assistant Treasurer, Daniel Mulino, with announcements likely to be made in coming weeks.
However, what is certain is that parallel legal and quasi-legal events will be taking place at the same time – the Court actions initiated as part of the Australian Securities and Investments Commission’s (ASIC’s) ongoing investigation into the collapses, and the actions of the Australian Financial Complaints Authority (AFCA) in processing complaints.
Financial advice was certainly a part of the equation with both Shield and First Guardian so, under the existing rules AFCA will be quite properly operating within its jurisdiction as will the Compensation Scheme of Last Resort (CSLR) with respect to any consequent unpaid AFCA determinations.
Thus, financial advisers may be obliged to foot the bill for ongoing CSLR activity while ASIC’s court actions remain on foot and the culprits remain unconvicted.
Another factor, introduced by the managing director of Sequoia Financial, Garry Crole, is the possibility of the platform-based superannuation funds activating the Operational Risk Financial Requirement (ORFR) compensation mechanisms.
The ORFR mechanism was put in place to cover Australian Prudential Regulation Authority (APRA) superannuation fund members losses relating to the collapse of Trio Capital. Crole believes it is equally applicable to the Shield and First Guardian collapses.
While Sequoia filed submissions supporting the need for an ORFR event with the platforms and APRA on August 29, the platforms have yet to formally indicate their response and APRA has been silent on the issue.
As well, there exists no clarity about the degree to which compensation paid as a result of an ORFR event would reduce the burden on the CSLR and, if indeed, it would result in AFCA needing to abort hearing the cases of people already compensated via such arrangements.
The possibility of activating an ORFR event has never been tested in the context of the AFCA and CSLR regime with the collapse of Dixon Advisory not involving platform-based superannuation.
And while all this is going on, advisers need to remain focused on the extent of a special CSLR levy and who will pay.
Yes, it’s complicated.
Not according to Hot Mess Jones who set up the ultimate Adviser disaster.
What do you mean its too complicated to make advisers alone pay?
It’s really easy. Just blame everything on advisers (which they do) and make them pay (which they will).
How many warnings were delivered to the incompetent Stephen Jones warning him that the scheme was not just inequitable but also unsustainable?
Another masterpiece by the ALP and regulatory captured Canberra.
Total joke.
Advisers shouldn’t be paying at all. These companies and institutions are fraudsters. What the hell does that have to do with individual advisers trying to make a living and build a small business. This CSLR is just pure theft, and another tax by stealth from Sir Taxalot (Albo) and his defunct government with its gang of ”Grifters”. This is about all this government is good at, spending & working out new and creative ways to rip off the working man. We are the most overtaxed country on the planet. Enough is enough. Stop the theft, and get your act together. Paying for somebody else’s fraud should not be my problem! The real problem is this useless government as always spend more than they take in taxes, have progressively sold all the countries assets, and give away whats left to global mining giants. If they would properly handle the countries resources, colect royalties and tax the corporate sector efficiently we wouldn’t have to prop up its regulators. It’s an absolute farce!
The existence of the ASIC levy and the ever increasing amount of the CSLR levy is creating a huge distortion in risk advice.
Currently the combined payout for those two levies will probably be round about $10,000 this year
The answer – those who want to stay in the business are going to GENERAL ADVICE.
General advice prohibits the adviser from taking into account the personal circumstances and objectives of the client and then making recommendations accordingly.
Thatt’s not good for the client.
The simple solution would be to not raise the CLSR levy on those who provide risk advice only. But ASIC wants to treat all advisers the same .
Just another government blunder, when no one thinks the matter through, nor consults risk-only advisers to find out what they think
Consult the 3 risk only adviser’s left?
Sorry I shouldn’t have, but govt never listen to any advisers.