Ramsay Review CSLR authors deliver crickets
An appeal to three of the Ramsay Review panellists to support the inappropriateness of the Compensation Scheme of Last Resort (CSLR) funding model appears to have fallen upon deaf ears with each of them declining to get involved.
The Association of Independently Owned Financial Professionals (AIOFP) has revealed it had written to the three panellists, current Australian Securities and Investments Commission (ASIC) commissioner, Alan Kirkland, Professor Ian Ramsay and current Productivity Commissioner, Julie Abramson.
The AIOFP also wrote to former Royal Commission chair, Kenneth Hayne.
“We were seeking their cooperation to publicly state that the CSLR structure they initially recommended is not reflected in the current CSLR legislation, AIOFP executive director, Peter Johnston told members
“We have been disappointed with the response from three, whereas Mr Kirkland is the only one not to respond,” Johnston said.
“The responses varied from ‘not wanting to be involved’, ‘no longer interested’ and too conflicted to comment’.”
“Considering the many millions spent by Consumers/tax payers on these matters and the influence these individuals have wielded, they should be compelled to comment post release when its in the best interests of Consumers in our view,” Johnston said. “We contend that if any of these highly esteemed and respected individuals cooperated, it will shine a different light on the CSLR issue.”
Johnston’s message to members said that the “crucial issue is the current CSLR legislation does not reflect the intent of the 2017 Ramsay Review and Commissioner Hayne’s RC 2019 intentions which had considerable market support”.
“We believe the CSLR outcome was heavily and successfully lobbied by the Financial Services Counsel [FSC] to favour of Institutions/Product Manufacturers [manufacturers] at the expense of others.
“Taking advantage of technical ignorance with Politicians and Bureaucratic bias in Canberra at the time, Manufacturers were excluded from being held to account for the management/performance of their own Financial Products and this responsibility was inexplicably and unfathomably passed onto the Advice Profession and their Consumer clients.
“It was truly an astonishing achievement by the FSC for their institutional Members to negotiate this position but unfortunately a diabolical outcome for Consumers and the Advice Profession,” Johnston said.
“We will now be writing to the Chair of the FSC seeking their cooperation with informing Minister Mulino that their lobbying success with the CSLR Legislation needs to be rescinded due to the seriousness of the unintended consequences.
“Considering CSLR and the Life Insurance Framework Legislation [LIF] are arguably the two most draconian legislative outcomes in Financial Services history, and the FSC successfully lobbied both outcomes, we will be requesting they also include the modification of LIF in their report to the Minister,” Johnston’s message said.
His message also accused the Australian Securities and Investments Commission (ASIC) of failing to take responsibility for dealing with flawed products and deflecting blame to financial advisers.
“ASIC takes no responsibility for allowing flawed products onto the market and no responsibility for the ongoing monitoring of these products, so what does ASIC actually do to protect Consumers from Products failing? Judging from its numerous press releases it spends the vast majority of its time being reactive to relatively minor market offences by attacking low hanging ‘Adviser fruit’ and not being proactive by holding other stakeholders to account for their conduct including themselves.
“The CSLR manipulation has severely clouded the future viability of the Advice Profession, Financial Advisers have no choice but to pass the ASIC and CSLR levies back to clients which is clearly not sustainable. Furthermore, it is extremely difficult to attract new entrants into the Advice Profession with the grossly unfair CSLR liabilities casting a massive black cloud over the industry.
“The CSLR solution is quite straight forward, Manufacturers pay for product failure, Financial Advisers for poor advice outcomes and Risk Advisers for poor risk advice failure. Banning Financial Advisers from creating a vertically integrated business model will eliminate future ambiguity around the responsibility if a product fails,” Johnston’s message said.
Unfortunately, this article is based upon a flawed understanding of the Ramsay inquiry. They never suggested that it should include products. A specific quote from the report includes this:
“The evidence provided by FOS of unpaid EDR determinations in the past show that over 90 per cent of unpaid EDR determinations, by value, relate to financial advice. Therefore, the Panel recommends that a CSLR should initially be restricted to financial advice failures where a financial adviser has provided personal and/or general advice on ‘relevant financial products’ to a consumer or small business. This means that only advice given by a ‘relevant provider’, as defined in section 910A of the Corporations Act, would be covered by a CSLR.
https://treasury.gov.au/sites/default/files/2019-03/Supplementary-Final-Report-2.pdf
Further the Hayne Royal Commission only recommended implementing a CSLR as proposed by the Ramsay Inquiry. He never recommended that it should be extended to products either.
So the reality is that this conspiracy theory around how the FSC managed to completely change the design simply lacks substance.
The CSLR has become a mess, and has highlighted a large number of issues. It needs to be fixed, however let’s keep to the facts. Pursuing the members of the Ramsay Inquiry on the basis of a flawed understanding of their report is just creating a circus.
How many of the 90 per cent of unpaid EDR determinations, were due to MIS product failure ?
When everything is dressed up as Advice failure, it is corrupt manipulation from MIS, FSC and Canberra. And has gone on for the last 25 years.
Eg, Dixon’s management and investment committee force all advisers to flog their dodgy in house MIS.
The dodgy MIS blows up.
E&P the large listed parent company ILLEGALLY PHOENIX 40+ Advisers and 3,000+ clients out of Dodgy Dixon’s to E&P for zero consideration.
Dodgy Dixon’s forgive a $16million eebt owed to them from E&P for zero consideration.
Treasury now employ Dodgy Dixon’s head of Advice, Nerida Cole in Govt Adviser compliance.
But yeh the whole thing is Advisers fault. Of course it is.
CORRUPT
CRIMINAL
VINDICTIVE
Behaviour from Canberra against advisers.
We never agreed to this theft.We wee never consulted or properly informed as to why we were responsible for paying funds stolen by others that had little to do with us or our business. These costs are not our responsibility, and none of this should have ever been taken from us.
Pure an utter Government theft, with little regard for helping small and medium businesses. Another tax by stealth!!
It seems to me ever since we had that Hayne royal commission everything in the advisory sector has gone to dust…