Speaking at the Australian Financial Complaints Authority (AFCA) Member Forum on Tuesday, chief ombudsman and chief executive officer David Locke said that the Compensation Scheme of Last Resort (CSLR) is a “step forward”.
“The CSLR’s full board and CEO have now been appointed and consumers will be able to start making claims from 2 April this year. We really do see this as a step forward for consumer protection in Australia,” Locke said.
“We are currently working through the backlog of previously paused complaints from before the CSLR legislation was passed. We have reviewed many of these complaints to determine at a high level how many may be within scope of the CSLR.”
Among these, he said, is the considerable backlog of complaints related to Dixon Advisory.
“Now that the CSLR legislation has passed, we have also restarted our investigation into the nearly 2,000 complaints we received against Dixon Advisory, which we paused after the firm was placed into voluntary administration in January 2022,” Locke said.
“We recently published a lead decision that considers core issues and principles and will help us progress this batch of complaints. This follows extensive industry consultation and finalising an AFCA Approach to determining compensation in complaints against financial advice firms.
“We are prioritising these complaints and have doubled the size of our investments and advice team to accelerate this important work.”
Justin Untersteiner, chief operating officer at AFCA, added that there had been over 5,000 complaints paused due to insolvency while AFCA waited for the CSLR to be legislated.
“We believe that it is likely there will be over 2,000 in scope of the CSLR; there is an enormous amount of work to be undertaken to work through these typically complex matters,” Untersteiner said.
“However, I can assure you, AFCA is doing everything we can to finalise these matters. We will publish all of the determinations made.”
Last week, the CSLR board publicly released estimates of what advisers will be expected to pay for the first full year of the operation of the scheme – which starts on 1 July 2024.
The CSLR estimate for the first levy period is $4.8 million, which falls within the scheme’s annual levy cap of $250 million and will be funded by the Australian government. This estimate is expected to meet eligible compensation claims and costs from the CSLR’s commencement on 2 April 2024 to 30 June 2024.
In addition, CSLR has provided a second levy period estimate of $24.1 million, which also falls within the scheme’s annual levy cap of $250 million and within the $20 million sub-sector cap.
This estimate is expected to meet eligible compensation claims and costs from 1 July 2024 to 30 June 2025.
Financial advisers will be required to pay $18.5 million in total, with the payment expected to be made in September 2024. The Australian Securities and Investments Commission (ASIC) uses the estimate determined by the CSLR to calculate the leviable amount per entity, which the regulator said would equate to a minimum levy of $100 plus $1,186 per adviser.
Speaking on the ifa Show podcast last week, the Financial Advice Association Australia’s (FAAA) general manager of policy advocacy and standards, Phil Anderson, pointed out a number of issues regarding the manner in which the CSLR burden imposed on advisers has been calculated.
First and foremost, he said, advisers are being charged for legacy issues, meaning they’re being asked to cop the cost of complaints received against Dixon Advisory in the period preceding the royal assent of the CSLR legislation.
As such, the FAAA wants to see the government pick up the entirety of the legacy Dixon Advisory matters.
“The business went into administration in January of 2022. The legislation for the CSLR was not passed until June of 2023, so nearly a year and a half later. It received royal assent in early July of 2023. We do not believe that this legislation should be applied retrospectively, and if we are required to pay for complaints that were submitted after the 7 September 2022, but before the legislation was passed, we think that’s wrong,” Anderson said.
“We think that there should not be a retrospective application of the law here. The vast bulk of those post-7 September 2022 Dixon complaints were received in September and into October of 2022. If you take out all of the Dixon Advisory matters, that would be a good outcome. That would significantly reduce the cost. But we would certainly argue that we should not be paying for Dixon Advisory matters that were received prior to royal assent in July of 2023.”
Mr Locke, would you be such a fan of the CSLR if you had to personally foot the bill?
Who was responsible for regulating and overseeing Dixon?
I can’t see why Advisers are involved?
Can anyone explain it to me?
What an obscenity. A client left me because he objected to a fee increase and went to Dixon’s. He loses money and I have to pay for it!
Wow absolutely incredible – what a joke this industry is ! this is unbelievable !!!
We must stand up and show our opposition to both the ASIC Levy and CSLR as they both contribute to the high cost of advice.
How do we influence political parties to counter the massive donations made by the banks?
If we are to succeed in influencing either party, you must do so at a grass roots level, for example we must attack Labor on Cost of Living as that is their Achilles heal right now.
The Liberal Party is also vulnerable on the same issue.
Unfortunately, our clients don’t necessarily believe that fees imposed on us will cause an increase in their fees. We know differently.
When we undertake reviews, we point out to our clients the high level of compliance we must undertake and the impact this has on their fees, however this will not change the voting intentions.
It is only personal safety, and the hip pocket nerve are the only ones that cause their vote to change.
Look at Queensland and you will understand why the Labor Government is in fear of losing office. In November 2024.
If we surveyed our clients and asked them which issues were important to them, I am sure that we would get a better understanding about the issues that really matter to them.
I urge all financial advisers to get behind the AIOFP in its efforts to influence both Labor and Liberals to reform our compliance nightmare.
Look at what Mortgagee Brokers achieved by being united.
To achieve a pollical outcome, we must offer our influence in exchange for what we want. This is what the Banks do and at present “The Banks tell the politicians to Jump and only response is How High”: The Banks buy these outcomes with donations…..
We cannot offer the Millions in donations; however, we may be able to offer either party Government.
Our clients are voters, and we have the capacity to influence them to vote one way or the other, by using our knowledge of what influences them.
Bennelong and Kooyong are good examples of our influence at work.
What can you do to help; Join the AIOFP and send a message to Canberra that we are united and a force to be respected.
William Mills Price Financial Intelligence
All discussion is about including Dixon clients in the pool paid for in effect by non Dixon clients who use a creditable adviser who now needs to recover the additional costs of operating in the fees charged to clients.
So the greedy people who ignored ASIC’s continuing warnings of “if it sounds to o good to be true, it probably isn’t” get rewarded for doing the wrong thing and other people who did not choose Dixon’s subsidise these people.
Plus there is nothing about pursuing the individuals who received the rewards from the Dixon operations to make then fund the claims.
Anyone seen Alan Dixon?
Who received the fees paid from USA investments?
Much easier to just charge the compliant advisers based in Australia who do what they are told.
Why are we paying anything!! Dont any of these groups have PI ?
I believe it is a product failure?
The complaints were paused just long enough for the advice profession to pick up the tab but not the government….