As the advice profession waits to find out how the additional $47.3 million that is attributed to the subsector under the Compensation Scheme of Last Resort (CSLR) for this financial year will be handled, the shadow minister has pushed for “fairness in who pays, and sustainability so the scheme doesn’t collapse”.
Speaking at the Association of Independently Owned Financial Professionals (AIOFP) conference on the Gold Coast on Wednesday, Conaghan said he has prioritised listening to advisers to “understand your challenges” since taking the role.
“You’re drowning in red tape and fees. I thought lawyers had it bad, but some of what you’re dealing with has surprised me. It feels less like consumer protection and more like punishment,” he said.
“The real tragedy is that all this regulation hasn’t stopped misconduct – it’s just driven good people out of the industry and made advice more expensive.”
Pointing to the Shield and First Guardian collapses, the shadow minister said the debacles clearly demonstrate that consumers are still being hurt in spite of the red tape constraining advisers who do the right thing.
“That raises a fundamental question: maybe we’ve been blaming the wrong people for too long? Maybe we should be looking harder at other players in the industry, and at why ASIC keeps dropping the ball?” Conaghan said.
While the losses from the latest large fund failures range in the hundreds of millions of dollars at a minimum, how much of that will be left for advisers to cover through the CSLR is yet to be determined.
Even without Shield and First Guardian, the expanding cost – which is likely to be even higher in coming years – has put the viability of the scheme in jeopardy.
“The CSLR was supposed to be a safety net for victims of bad advice,” Conaghan said.
“It probably had fundamental flaws from conception. But under Labor it’s become something else entirely – a runaway mess with costs spiralling out of control.
“It’s a scheme where too much of the blame is being put on advisers.
“You are paying for failures that were not yours – and in many cases, other players have more blame. You didn’t license the dodgy operators. You didn’t wave through the schemes that collapsed.”
According to the shadow minister, the regulator needs to shoulder a good chunk of the blame.
“Let’s be honest: if ASIC had acted earlier on known bad actors, far fewer victims would be turning to the scheme today,” Conaghan said.
“Yet the same government that insists on holding inquiries and commissions for everything else seems reluctant to look ASIC squarely in the eye.
“We’ve had years of reviews, reports and recommendations about ASIC’s failings.
“Yet every time a scandal breaks, we hear the same excuses: ‘We didn’t have the resources’, ‘We had to prioritise’, or ‘We need more powers’ – to my mind, they already have plenty of resources and powers.”
While Conaghan is yet to meet with the regulator, ifa understands he will be shortly.
Ultimately, he added, the CSLR “must be reformed”.
“I hope the government’s review produces real solutions by the end of this year,” he said.
“Advisers can’t wait forever. If we don’t fix this, good advisers will keep leaving, advice will become more expensive and consumers will be worse off.”
Adviser fees will keep rising as adviser numbers plummet.
Thankyou ASIC, thank you CSLR and thank you muppet-politicians.
Couldn’t do this without your collective ineptitude, you shameless lot.
I can’t understand why First Guardian & Shield unitholders are being directed to AFCA for a CSLR payout fraud of that scale is not what the CSLR was setup for.
ASIC have failed in their duties to 12,000 Australians and it’s them & the government who need to accept the blame for the failure of the system which allowed such a fraud to be be perpetrated under the eye of the regulator.
Compensation for those 12,000 needs to be funded across the whole financial industry or confidence in the whole superannuation system will be lost, people will not trust anyone in the industry.
The government need to ensure confidence remains strong and compensate those affected not put all the blame on all advisors for the action of a few dodgy operators.
He knows how to work the room, eh! Of course this should be on ASIC (and ATO) but they are Teflon Tuesday to Thursday public servants.
[i]“You’re drowning in red tape and fees. I thought lawyers had it bad, but some of what you’re dealing with has surprised me. It feels less like consumer protection and more like punishment,” he said.[/i]
That would be 100% correct.
No other profession would tolerate the absolute Canberra crap that we have endured for many years which seemingly never ends.
“..Maybe we should be looking harder at other players in the industry, and at why ASIC keeps dropping the ball?” Conaghan said.”
How many times has ASIC sat back and reacted when funds blow-up, despite the activity being reported to them years earlier. We have a regulator that has a purile stance on adviser regulation, as evident by wanting to breach report every adviser due to not having account numbers on new super accounts, despite the client obvioulsy consenting to fees. What are their priorities?
This says a lot about the culture and management focus inside the building.
Completely out of order.
ASIC is full of law graduates who have a high IQ, but lack the EQ to get a job in a good law firm in their home city. They end up in cold Canberra, where they become bitter and twisted. They look at financial planners, with amazing businesses and client relationships and they are filled with jealousy. They think we are stupid and our clients even more stupid. They have no idea about the value we bring to the lives of our clients, the peace of mind we provide or the protection will offer. They think our services are a waste of money and they said as much at the RC, only acknowledging that financial advice was worthwhile for a handful of Australians with a large SMSF balance. Hayne gobbled up a lot of ASIC’s nonsense, but he thankfully did not agree with that outrageous assertion. The culture at ASIC is such that any consumer blocked from seeing a financial adviser is considered to be a win. Any additional red-tape, which reduces our capacity is a win for the community, in their eyes. Their relentless obsession with obstructing and removing financial advisers from the landscape has distracted ASIC from their most important obligation. ie. early detection and quick action against large-scale fraudsters. Maybe, just maybe our politicians are finally waking up to the sick culture at ASIC which has caused so much harm.
A person I once worked with told me they ‘loved a crisis’ as it provided them with a purpose and gave them an opportunity to be the white knight. That person always had designs to work at ASIC but is now working at AFCA. Too much of that mentality on that side of the fence.
Four Corners & Sixty Minutes should both do a report on ASIC to expose their terrible culture and practices to the Australian public…
A royal commission should also be held to hold them to account!
ASIC are totally reactive. Always have been, always will be.
I bet they get bonus or it is actually better for them via KPIs to wait for issues to blow up… why else do they always wait? If they were a normal company half their staff should be sacked you would think.
Always has been yes but never say always will…
The time is overdue to investigate them!
Surely as an industry all the advisers that have paid for this scam should have all our money refunded to us with interest. The real criminals here are ASIC and the politicians.
The issue is not just that it puts too much blame on advisers, but also that it has become the Compensation Scheme of FIRST Resort.
Why are they trying to apportion Shield and First Guardian when there has been no attempt to get compensation from anyone yet. Last resort means everything else failed, but AFCA, CSLR, ASIC, Labor, all treat this as the client’s first stop to get their money back.
These costs should not even be considered until every single person involved has been sued to bankruptcy.
Nice words from LNP minister Pat Conaghan, its almost as if he understand some of the Canberra mass over regulation rubbish and the absurd CSLR.
But let’s see if anything happens to fix it ?
And don’t you dare LNP try to blame it all on ALP / Jones.
Frydenberg / LNP also designed CSLR for the Banks / Institutions and MIS owners to pay Nothing.
The whole of Canberra are corrupt and anti Advisers.
ENOUGH IS ENOUGH.
Here here well said suggest AFSL holders refuse to pay these ridiculous CSLR bills and just send them to ASIC!