After telling ifa last week that the Compensation Scheme of Last Resort (CSLR) – which aims to provide limited compensation where a determination issued by the Australian Financial Complaints Authority (AFCA) that relates to a financial product or service remains unpaid – “unfairly places yet another significant financial burden on the shoulders of financial advisers”, CEO Neil Macdonald has called for the legislation to reconsidered.
“At face value, the concept of a CSLR, to protect innocent victims of misconduct, is honourable. However, we believe there has not been enough consideration around either the scope of the problem or the optimal solution,” Mr Macdonald said.
“The stalled legislation should give whatever party comes to power after the federal election pause for thought.”
Mr Macdonald noted that the legislation would see financial advisers cover $12 million of a $16 million in its first year and has called for government to ensure the CSLR ultimately does not cost more than the amount of compensation involved.
“At first glance, the proposed CSLR appears to be a clear case of the cure being far worse than the disease,” he said.
“We must also remember that, rightly or wrongly, in most other professions, for example, the medical profession, consumers must sue for compensation if they suffer as a result of misconduct.”
The Senate economics legislation committee recommended the passage of the CSLR in February, however it is not expected to be looked at again until after May’s federal election.
Speaking to ifa last week, the Association of Financial Advisers (AFA) CEO Phil Anderson predicted that any major changes pertaining to the advice industry will not be addressed until post-election.
“The government has now gone into caretaker mode, which means that outstanding legislation such as the Compensation Scheme of Last Resort, and other regulatory reform, such as the proposed change to the education standard, will need to wait until after the election to be resolved,” he told ifa.
“We are not expecting any major announcements on financial advice policy during the course of the election campaign, as we expect that both parties are going to rely upon the Quality of Advice Review [to be released in December] to drive the agenda for fixing the issues in financial advice and making financial advice more accessible and affordable.”
