In October, the Compensation Scheme of Last Resort (CSLR) announced that it expects the upcoming 2025–26 levy attributed to personal financial advice to exceed the $20 million subsector cap, which has raised questions about how Financial Services Minister Stephen Jones will designate the additional levy.
Responding to a number of Senate inquiry submissions from industry bodies looking to avoid taking on additional costs, Financial Advice Association Australia (FAAA) CEO Sarah Abood said the sentiment seems “a little self-interested”.
“The thing that I’m raising an eyebrow at is some of the submissions saying that amounts over the cap shouldn’t be shared more broadly,” Abood said at a media briefing during the FAAA Congress on Thursday.
“I’m not sure on what basis there’s a view that we ought to be bearing that additional cost.”
In its submission to the inquiry into the collapse of Dixon Advisory and its impact on the CSLR, the Mortgage and Finance Association of Australia (MFAA) argued that it would be unfair for mortgage brokers to get slugged for complaints that have nothing to do with the credit intermediary subsector, noting it is estimated to account for just 10 complaints in the second levy period.
“There are no indications of an increase in claims for this subsector beyond these projections, with uncertainties affecting the levy period primarily attributed to the financial advice (i.e. wealth management) subsector,” the MFAA said.
It added: “If the special levy is distributed across several subsectors, entities not directly responsible for excess claims may bear additional financial obligations. This cross-subsidisation can lead to increased costs for subsectors with minimal claims on the CSLR, including small broking businesses.”
This sentiment was shared by both the Australian Banking Association (ABA) and the Insurance Council of Australia, with the ABA adding that many of its members have already covered a chunk of the compensation for the collapse of Dixon Advisory through the $241 million pre-CSLR levy – $203 million of which related to Dixon.
“Any application of ministerial discretion must not exacerbate further cross-subsidisation by creating a precedent which does not encourage subsectors who have created losses [paid for by other subsectors] to uplift their own standards and reduce/prevent future harm to Australian consumers,” it said.
However, Abood argued that while all of the industry bodies are aligned in wanting to make sure that consumers are protected, “we need to be making sure that people do the wrong thing the first ones to pay, and that they are pursued to the extent of the law”.
“We’re not satisfied that that’s happened yet,” she said.
“When the amount above the cap is considered, I think the minister’s got to consider the reason that it’s gone above the cap, and what is the argument for where that goes?
“He’s got very wide discretion. He could share it across all ASIC-regulated sectors, for example, or he could pick a sector. There’s not restriction in the legislation, but he’s obviously somewhat restricted by the politics of it and the perception of fairness.”
Importantly, Abood said that regardless of how the minister decides to utilise his power to apply a special levy, advisers need to know as soon as possible so they can plan ahead.
“We don’t have a firm answer yet on what will happen to that money, and we need a firm answer, because advisers can’t plan right now,” she said.
“They’ve got no idea what the bill is that they’re going to get, and our argument is that we need to be clear about who’s going to pay, because it looks likely that it will go above $20 million this year, and advisers have a right to be able to plan for their businesses.
“Certainly we don’t have the view that we should be paying the amount above the sector cap, because that’s why there’s a sector cap.”
November 2024 and now the FAAA wants a “firm answer”. What on earth have the FAAA been doing? Does not seem to be much bit in the FAAA dog so it appears to be no more than Ms Abood making a press statement to look likel she is doing something – with no consequence for Mr Jones ig he does nothing? Well done Ms Abood. A real achiever?
Memo Mrs Abood.
Mr Jones is a politician. Mr Jones is a politician that has his base loyalties elsewhere, not with self-employed advisers.
The FAAA should take everything from Mr Jones says with a very large grain of salt. He has a proven track record – his promises ar e not tworth cracker, as we Aussies say
Agree. Jones is happy to watch the self destruction of the industry that he has 1/ no care for and 2/ enjoys watching 3/ does not have to do anything and stays re-elected. The FAAA says the right things but has no ability to create any result. Jones does nothing. So the industry continues to wane.