Industry funds urge strengthening of advice PII regime
Major industry funds group, Super Members Council (SMC), has thrown its support behind giving the Compensation Scheme of Last Resort (CSLR) the ability to access the Professional Indemnity Insurance cover of insolvent advice licensees.
The SMC has responded to Treasury consultation on enhancing the effectiveness of PII arguing that it should be strengthened to encompass principles similar to the superannuation funds’ Operational Risk Financial Reserve (ORFR).
The SMC has also strongly reinforced its view that superannuation funds should not be made to carry the cost burden of funding the CSLR.
It said extending similar principles to PII for relevant licensees, such as through tighter minimum coverage limits, reduced excesses, and clearer fraud exclusions would ensure perpetrators bear primary responsibility while preserving CSLR reserves for exceptional cases.
“Well-designed PII is one part of an improved system of accountability and consumer protections. It shapes incentives to manage risk, determines who ultimately bears the cost of failure and affects whether the group can withstand major advice-related losses without defaulting to members or the CSLR,” the SMC submission said.
“While enhanced PII requirements represent a vital lever to protect consumers and stabilise the CSLR, they are not a substitute for upstream prevention,” it said. “Gaps in the existing regulatory architecture, including inconsistent enforcement of licensee obligations under ASIC’s RG 234, limited proactive risk monitoring, and inadequate oversight of high‑pressure or conflicted sales practices, continue to permit consumer harm.”
“Without reforms to existing anti‑hawking provisions, conflicted remuneration prohibitions, licensing frameworks for platforms providers and early‑intervention mechanisms, these weaknesses will continue to drive PII claims and premiums upward.
“In the absence of a more consistent and preventive approach, PII may become prohibitively expensive for compliant firms, reducing the availability and accessibility of quality financial advice for consumers,” the SMC submission said.
“SMC notes that any increase in regulatory requirements or obligations relating to PII is likely to lead to premium repricing and potentially higher costs across the market. Such changes could shift the distribution of the cost burden among different segments of the financial services industry. It is essential that any significant adjustments to PII settings be informed by robust consultation and supported by modelling to understand how changes in premiums and availability may affect all insured entities across the financial services sector.”
“Further, and in line with PII being the first line of defence, SMC also reiterates its previous calls to Government to explicitly rule out any extension of CSLR levies to APRA‑regulated super trustees. These funds already meet dedicated compensation and remediation costs through fund reserves including their required ORFR and have no history of CSLR claims,” the submission said.
Yeh awesome, make innocent advisers pay more compo by insane PII increases.
SMC the PI Insurers will increase premiums through the roof and or simply abandon the Australian Advice sector if fixed to pay the obscene CSLR.
Industry funds want to push up the costs so that the few remaining advisers cease to exist.
Sure seems that way.
In my opinion, just another attempt to move cost and jeopardy back on advisers.
Where is the impact assessment? (Is there one?)
If there isn’t one, I might start up my own lobby group and write submissions to Treasury arguing contributions to the CSLR should be funded per member of the superfund.
I’ll make it $50 per member, per year. That seems fair to me.
If you have 3,500,000 members the contribution is $175,000,000.
I think that is the answer. A levy ‘per client’ is a reasonable way to do this. That way the large corporate players aren’t wiping out the small business operators with costs. It would be the fairest way of passing on costs, because at the moment the small business operator is shouldering far more of the burden than anyone else because we are an easy target for the Government. The Industry Funds must pay their way. At the moment they are clipping every client at the rate of over 1% p.a. and doing nothing for it. If the sector is holding 35% of the Superannuation they should at the very least pay 35.1% of the CSLR bill or 35.1% of the PII costs. Thereis just shy of 11Million members in these funds. At $50 per member it would raise $550,000,000 p.a. which would greatly help the Labour Government to fund CSLR and any potential excessive PII claims.
I think that is the answer. A levy ‘per client’ is a reasonable way to do this. That way the large corporate players aren’t wiping out the small business operators with costs. It would be the fairest way of passing on costs, because at the moment the small business operator is shouldering far more of the burden than anyone else because we are an easy target for the Government. The Industry Funds must pay their way. At the moment they are clipping every client at the rate of over 1% p.a. and doing nothing for it. If the sector is holding 35% of the Superannuation they should at the very least pay 35.1% of the CSLR bill or 35.1% of the PII costs. Thereis just shy of 11Million members in these funds. At $50 per member it would raise $550,000,000 p.a. which would greatly help the Labour Government to fund CSLR and any potential excessive PII claims.
Lets not forget the Industry Funds hold 35.1% of the market, they have just shy of 11,000,000 clients that get charged over 1% each for sitting their money in a predetermined fund that rarely changes(i.e. therefore there is little cost except advertising and gifts to the Unions, Governments, and the occasional bikie stand-over man). They hold $1,400,000,000 (i.e. thats 1.4 Trillion) in retirees assets. and contribute nothing to the CSLR or to PI-insurance costs. They must be forced to shoulder their share of the burden. Its a very lucrative business getting paid to do nothing. Virtually none of their clients receive adequate Financial Advice as they seek to protect their monopoly on Retirees money. Now they seek a free pass on the lack of adequate advice by asking the Government to allow just a little bit of nudging (or what we call Personal Financial Advice by its real name) from carefully crafted ad campaigns designed to keep Australian Retirees in the dark about their choices and in the dark about more important Financial Decisions that an actual adviser would raise and discuss(i.e. Strategies around Contributions, Aged Care Advice, Wills and Estate Planning, Budgeting Income, Sale of assets where required, Non-Super Investments, winding up of Business correctly, Options for Investment and better performance of their funds, Wealth Transfer, Trusts for children). Unfortunately the Industry Funds think that giving A NUDGE to their clients to basically get locked into a pension contract with ONLY their product is a solution to receiving proper Retirement Financial Advice. They would like their clients to ignore every other aspect of their Financial Welfare so they can keep clipping the ticket and retain their own products revenue stream. To hell with the clients best interest, because only the interest of the Industry Funds Products matter. Thats what they are trying to convince the Government of, and unfortunately they are that stupid that they will probably fall for it, or get bought by the Industry funds!!