The Compensation Scheme of Last Resort (CSLR) has headlined the Financial Advice Association Australia’s (FAAA) list of priorities for an incoming government, with chief executive Sarah Abood arguing that the “importance of quality professional financial advice for all Australians” is becoming increasingly apparent to all sides of politics.
“While well-intentioned, much of the legislation introduced since the Hayne royal commission has not hit the mark. It has ultimately served to drive up the cost of advice and made it more difficult for people to get the advice they need at an affordable price to manage their increasingly complex financial needs,” Abood said.
“Our future government needs to take substantive steps to fix the crisis in our profession.
“Our key asks are designed to help reduce the cost of providing professional advice and also encourage more people to enter the advice profession – both critical requirements for a healthy and sustainable financial advice community,”
The five “key asks” that the FAAA has put together based on a member survey are:
- Fix the Compensation Scheme of Last Resort.
- Provide adviser access to the ATO portal.
- Deliver effective Delivering Better Financial Outcomes reforms and implement a standardised fee consent form.
- Instigate a financial services razor gang to cut red tape.
- Support new entrants to the financial advice profession.
The FAAA added that it is not just engaging with politicians and other industry stakeholders, but also contacting “every candidate in Australia” to seek their commitment to the key asks.
Ahead of the election, the association will launch a dedicated hub that will provide ongoing updates on the candidates’ positions.
Ensure CSLR is fit for purpose
While the FAAA’s position is well known to both members and both sides of politics, Abood reiterated the “most immediate requirements” to fix the scheme, including capping the financial advice levy at $10 million and stopping financial advisers from paying for product failures.
On the CSLR, Ms Abood says the FAAA has already made several recommendations to ensure the scheme is fit for purpose.
“These steps would go a long way to ensuring the CSLR achieves what it was set up to do, without causing immeasurable harm to the financial advice profession, and potentially failing consumers,” she said.
Beyond imposing increasing costs on current advisers, Abood added that the CSLR levy is also suppressing interest in prospective advisers joining the profession.
“Paying a levy for the mistakes made by others before you even started in the profession is clearly a deterrent to becoming a financial adviser. It is essential that more people are encouraged to become financial advisers, to meet the growing need of Australians for professional, quality advice to manage their financial situation,” she said.
“Therefore, we are also calling for greater support for new entrants to the profession, including a flexible education standard, financial support from the government for the employers of Professional Year candidates, and reducing the cost of doing the financial adviser exam.
“These measures would go a long way towards streamlining the process for those wanting to become a financial adviser.”
The FAAA echoed the Financial Services Council’s (FSC) earlier calls for a “red tape razor gang” to slash inefficient regulation.
“Excessive red tape and regulation in the profession have contributed substantially to the cost of professional financial advice,” Abood said.
“Many voices are calling for a tighter focus on cutting red tape in financial services, offering substantial benefits to both advisers and their clients.”
In the lead-up to the election, the FAAA will hold a series of Federal Election Financial Services Summits in key electorates around Australia, which it said would discuss what needs to be achieved over the next three years to improve accessibility and affordability of financial advice.
Sarah Abood will be speaking at the Momentum Media wealth portfolio’s pre-election event on Thursday, 10 April. Click here to find out more.
7. Highlight conflicted relationships between product providers and political parties.
In my opinion, this element has tainted everything. The stench of it is awful. Appalling.
Once the 5 “key asks” has been reviewed & implemented, hearing into CSLR and ASIC investigation and enforcement 2024 has been thoroughly reviewed. Hope & Pray the below is fixed (this is facts):
ASIC should review the case and properly investigate the financial planner they crucified (lost their houses, savings and nearly lost his family and suffered significant distress through this experience until now) for alleged churning of insurance products. Through some bogus complaint (severely manipulated & incomplete misleading information) regarding this financial planner, they alleged the financial planner churned insurance products and put his clients into an inferior product and claimed commissions from it (His superiors received ALL the commissions as per evidence, not him, he was an employee). Turns out, this financial planner had no choice to represent himself at the AAT (no funds to hire a lawyer or barrister, spent $400k legal fees). EVIDENCE shows new life insurance products clearly had more features and benefits and monthly premiums was significantly lower and had a reference number before assessment for every single file (Reviewed by 2 different departments). Materials were severely manipulated to make it look like this financial planner was a crook. This financial planner had no compliance breaches in the 4 years he was employed, 100 plus good character references from the community and industry & had all the awards, 3 independent experts was hired to investigate the matter and turns out there was no formal / verbal warning of any breaches and other financial planners were doing it and still practising.
This matter was reported to ASIC a year and a few months after this financial planner started his own practice.
Marriage of Justice.
6. Create an industry body responsible for registration, compliance and discipline, so that it is not under ASIC’s banner.
100%, so investigations are done properly and to eliminate bogus complaints & focus on serious matters instead of picking insignificant matters. ASIC needs to lift their performance coz Australia’s economy has gone to the toilet.
Absolutely. Seems to be lots of evidence that ASIC is failing in it’s role to supervise the ASFL system as demonstrated with Dixons and more to come I suspect – yet ASIC charges for this role?
Why are Advisers paying for ASFL’s, ASIC to oversea all of it and when one fails, Advisers pay for the failures via CSLR? All more fat cats taking fees with no responsibility? Can’t even sack them or un-elect them? Feels like Russia in the 1980’s?
Exactly! The AFSL system for qualified professional advisers is a joke, especially when the proverbial hits the fan and the licensee can’t meet their liabilities. In this instance the cost is shifted to the CSLR, of which advisers pay anyway. Currently it’s a huge cost and hinderance on productivity. Maybe you can leave the AFSL system to supervise the unqualified superfund advisers. Imagine the industry body taking 30 minutes to create a standardised fee consent form too….