Original CSLR cost estimates wildly inadequate
The Compensation Scheme of Last Resort (CSLR) is facing into escalating costs and the reality that early estimates of what could be expected fell far short of reality.
CSLR chief executive, David Berry told Financial Newswire’s Advice Wealth and Super Conference in Sydney that the initial estimates of what the compensation scheme would be facing into had needed to be revised significantly upwards.
He said the initial estimate had looked at a range of scenarios from ‘business as usual’ to ‘massive’ with the BAU estimate had been framed around four incidents a year generating nine claims valued at $1.25 million, while the ‘massive’ scenario estimated one incident involving 400 claims once very 20 years and costing $50 million.
Berry said that the reality since the formation of the CSLR had proven to be a BAU scenario of eight incidents a year but, more importantly, the ‘massive’ scenario had been revised upwards to one event every five years costing $71 million.
He described it as a ‘tragedy for the industry’ that these revisions had been required and that it reflected worst part of the financial services industry.
Berry also made clear that the fall-out from the collapse of the Shield and First Guardian funds had yet to significantly hit the workload of the CSLR because the Australian Financial Authority (AFCA) was still working its way through complaints.
He said that only 29 claims related to Shield and First Guardian had so far entered the system.
As well, he noted that the CSLR is still working its way through complaints related to the collapse of Dixon Advisory and would be doing so for a further year or so.
Berry noted that the ongoing funding of the CSLR remained under consideration by the Government but that, as things stand, it is likely that the level of claims will continue to outstrip the $20 million sub-sector cap for a number of years.
He said it was the CSLR’s preferred position that it became less relevant and that the claims within any year fell below the $20 million cap, but that was some distance off.
Scenarios that weren’t modelled, were big reductions in CSLR claims due to:
Clearly CSLR thinks these positive and beneficial outcomes are so unlikely to occur under our broken regulatory system, there’s no point even considering their possibility.
And what clowns in Canberra are going to be held accountable for this obscene Adviser THEFT.
– Jonesy, nope
– Treasury, nope
– ALP or LNP, nope.
The muppet shows in Canberra are never held accountable.
Even when proven to have acted corruptly via a RC into Robo Debt, no muppets are held accountable.
No wonder problems aren’t solved and keep re-accruing, ZERO ACCOUNTABILITY from Canberra.