Following the Financial Advice Association Australia’s (FAAA) admission that Financial Services Minister Stephen Jones has failed to respond to the association’s “many” requests for engagement on the matter, ifa has learnt that for the minister, the Compensation Scheme of Last Resort (CSLR) is a sorted matter.
Last week, the FAAA estimated that due to an influx of new complaints related to Dixon Advisory, the financial advice profession will have to pay an estimated additional cost of approximately $65 million.
Speaking on the matter, FAAA chief executive officer Sarah Abood said: “The minister has not yet responded to our many requests for engagement on this matter, and we call upon him again to work with us urgently to find a sustainable solution to this crisis.”
ifa reached out to Minister Jones on Monday to find out whether he has an intention to address the matters raised by the FAAA. ifa also asked whether there will be a review of the associated costs, or if he intends to implement the levy on the financial advice profession as initially planned.
To these questions, the minister responded with: “The CSLR is being implemented as legislated last year with bipartisan support after almost a decade of consultation and discussion.”
Although not a direct answer to ifa’s questions, ifa feels it’s safe to deduce that the minister has no intentions in the present moment to make any changes that could help alleviate the CSLR burden on advisers.
Last month, speaking at an AIOFP dinner in Sydney, Minister Jones defended the government’s implementation of the CSLR, blaming the burgeoning cost of advice on the dwindling number of advisers operating in the country.
“We’ve got to find the right doorways to get people through and look at post-degree qualifications and the professional year and sort all of that stuff out,” Minister Jones said.
He added that the anger being directed at him regarding the CSLR is “fair enough”, but pointed out that the industry funding model is applied “right across corporate Australia”.
“If there are fewer bodies to pass regulatory costs on to, they’re going up,” he said.
“That’s the fact of the matter. So, if you’re looking at why your regulatory fees have doubled over the last four or five years, it’s because the number of advisers who are paying it have halved.”
The CSLR estimate released in March put an additional cost of $1,186 on each adviser for the first full-year period – starting from 1 July 2024 with payment expected in September 2024.
Combined with the ASIC levy of $2,818 per adviser, combined levies will leave advisers out of pocket just over $4,000.
The FAAA has now estimated that since a further 544 complaints about Dixon Advisory have been made since 15 February 2024, the financial advice profession will have to pay an estimated additional cost of approximately $65 million. This equates to a direct cost to every financial adviser of $4,165 on top of what has already been disclosed.
Although the cost per year on a subsector shouldn’t exceed $20 million, the legislation spells out that the CSLR operator will need to notify the minister if the levy will exceed that amount.
Click here to read more about the minister’s powers regarding this cap.
QAR delays
ifa also asked the minister whether the superannuation-related areas of the Quality of Advice Review (QAR) were contributing to delays, to which he responded with: “The government is focused on improving the quality and affordability of financial advice by cutting red tape on financial advisers that offers no protections for consumers.
“Legislation is being developed through 2024 to reform statements of advice and remove the safe harbour steps which will significantly drive down costs for financial advisers.”
This discriminatory law is a failure and will always penalise the individual Advisers. Is ASIC (and Legal firms) prosecuting the Directors and officers and of the failed group responsible for such a massive financial failure and possible fraud on investors. Any financial recovery should be applied to the CSLR pool.
At what point should consumers pay the price for their own bad decisions?
I’m supportive of a compensation scheme but this does need to be seen as a “last resort” and not a cash cow that we fund to win a political party some votes. The criteria to be eligible for this needs to be significantly tightened.
We keep hearing that all these burgeoning costs should be shouldered by our industry due to bad apples, but most of these so-called bad apples are long gone.
If a consumer is dumb enough to take advice from a social media influencer, then they deserve to take the loss and not receive any compensation. There is no get rich quick scheme in life and REAL and QUALIFIED advice is not cheap. If consumers take the cheap route and get burned, then they also need to take some responsibility for their actions.
We should not be funding litigation for ASIC in areas like this either, this is not financial advice and was not provided under an AFSL nor by a qualified adviser who holds PI.
As someone else here said, why do we have a CSLR when it is a regulatory requirement for us all to hold PI.
Regulatory fees are part of the cost of doing business. If you cant absorb these costs, get out of the way. More clients for the rest of us.
This is exactly the outcome that the industry funds want.
Costs up for SME advisors, advisers out.
They are having the playing field cleared for them and them alone.
I can’t believe the comments from advisers living in fantasy land that QAR is going to ever be implemented in their favour.
The bulk of advice will be via industry funds.
There will be very few independent small advice practices within 5 yrs.
The minister seems to have missed the point when he said the CSLR is an “industry funding model is applied “right across corporate Australia”. Advisers are being asked to pay for product failures and for advice failures by people who are not advisers.
JONES & LABOR OUT.
Enough is enough. Cheerio.
The time for talking has past- we need direct action – cessation of payments of levies (CSLR/ASIC) on a nationwide scale with associated media. We all know they only respond when they have to. There is no such thing as a “fair go” with these guys. I think there is one minister if that that has ever been in business. They are commercially vacant and don’t care.
Can someone organise a march in the street around the whole country to show our rage???
My mother told me “never to argue with people like Jones”!
Remind me what the FAAA or AIOFP has done for any of us advisers to help stop this landslide? NOTHING!!!!
Won’t be getting my vote.
It’s time that all of this constant BS be called out in the mainstream media. I would rather see my FAAA membership fees being spent taking out full page ads in the papers, rather than sending the FAAA to Canberra to have tea and biscuits and pander to these clowns. Diplomacy has not worked, so what more have we got to lose? The mortgage brokers were successful in having things overturned by going public!
Maybe all advisers should simply refuse to pay the fee on the grounds that the CSLR levy is grossly unfair and does not actually relate to failures from advisers post legislation of the scheme. ASIC would be hard pressed to prosecute 11,500 odd advisers!
The best solution is for all advisers to simply “NOT PAY ANY CSLR OR ASIC LEVIES” if we all refuse to pay things will change for the better. Advocacy with Jones has/will continue to fail. All advisers must come together on this and demand real change. There is strength in numbers.
Vote them out.
I think that we need to stop inviting this guy to speak at conferences etc. Or at least have a Q & A session.
He is not with us – he is against us.
Only a Sith deals in absolutes
Oh really?
Agree. Although im sure in a Q&A with an audience he would be absolutely slaughtered and never return. It would only solidify his hatred to the wider community.
Guess this is what happens when an unqualified politician with zero experience in finance or real life experience, particularly within small business thinks he knows best.
Vote them out.
Disgusting and an unmitigated disgrace.
So lovely to see the (any) QAR red tape relief so soon.
I am sure, there will be more advisers leaving the industry as small practices can not afford to pay this all the time. Big industry super funds will be the last ones left to advice, may be this is what the Jones wants.
Don’t you think that is obvious? What is it, $3 Trillion and 11% of yearly payroll in FUM at risk of Rollover by Financial Planners – and you wondering?
Clearly, this is what they want.
I think there are more and more people drawing this conclusion.
Yep, what a failure!
Again, people making decisions on our industry that don’t use or understand what we do, why, and the people we support both clients and our Staff.
Can someone tell me why we need CSLR if we all have PI insurance?
Is CSLR also going to be introduced to every other industry in Australia for exactly the same purpose?
The ‘Last Resort’ part about this measure seems to have fallen by the wayside.
PI is on a claims made basis, so if it lapses, you arent covered.
Jones is delusional. The removal of the safe harbor steps will probably mean that 1 box in the annual File Review wont need to be ticked. This will save most people nothing.
You will still need to comply with the Best Interest Duty. Only now, when AFCA or the FSCP hear a matter and they ask the Adviser to prove they have acted in the client’s best interests and the Adviser wont be able say that they followed the Safe Harbor steps as best they could. So what proof will advisers have????
If you want to drive the cost of advice DOWN, then you need to remove CSLR and ASIC levy. These are costs that should be funded by the Commonwealth.
Nonono safe harbour is going so industry funds don’t need to explain when clients are worse off rolling in but can increase funds under management, of course. Not to help actual non aligned advisers who put Australians interests before their super funds.
All part of the plan to drive more advisers out or force advisers to raise fees to drive away clients thinking that more people will then gravitate to the industry super funds, which are more likey to then allow the government access to the super pot! Its not hard to see that Australia is in the early stages of becoming a communist country with more Government control and oversight over our everyday lives!
He might say that it is being implemented as legislated, however his own March 2023 Explanatory Memorandum provided no cost estimate and no regulation impact statement. The Parliament was ill-informed in what they were voting on as his advice document (the EM) was misleading and deceptive. I doubt anyone in the Parliament thought that this CSLR Bill would result in the advice profession being slugged $100m. If he is setting a precedent for the advice profession with this legislation, then heaven help us. What a disgrace.
This change in tone by Jones has been noticeable for some time. It doesn’t bode well.
At some point FAAA and others should consider legal action (if it is in fact an option) otherwise FP will be trampled over never to recover.
How can ANYONE think it’s fair that the bulk of the costs of compensating clients of a collapsed business that had a listed campany as a parent be borne by the remaining advisory force when the conduct for which clients are being compensated occurred even before the Compensation Scheme of Last Resort came into existence? I was prepared to give Jones the benefit of the doubt when he first became Minister, but no longer. At best, he’s incompetent. More likely, he’s worked out that the bulk of advisers don’t don’t Labor. Well, he’s pretty much GUARANTEED that now!
Time to say that enough is enough from this Government and this Minister.
Labor out.
I simply can’t afford this.
I might as well go and work as a barista in the local cafe
How about real estate? The politicians always support that industry.
Another way to read this is Jones again ignores FAAA. What have they actually changed or helped with regard to Advice? Useless the AIOFP has the right approach.
Another fail and complete balls up from Jones. The cost to adviser has never increased more in any previous Government. Even the coalition admitted and knew the impact. jones talks the talk then increases Adviser taxes by the highest amount in history. After promising to fix the mess. What a lying buffoon.
It is not just him…we have been failed by our associations YET AGAIN!…would a any government have the guts to charge Union members for failed projects or builders etc?
Failure or all part of the plan? I would not be at all surprised if ASIC are also involved in conspiring with the Government on how to get rid of advisers!