A total of over $360,000 has been paid to four claimants by the Compensation Scheme of Last Resort (CSLR) two months after the scheme commenced operations.
The CSLR said in a statement on Tuesday that three of the claimants were victims of poor financial advice.
“Whilst the financial services industry works toward the betterment of their clients it’s unfortunate that there are a small few who take advantage of the trust bestowed on them. Ensuring some basic consumer protections works to lift trust in the financial services industry and the professions that support it,” CSLR chief executive, David Berry, said.
“This crucial safety net for victims of financial services misconduct is now in place and those who have experienced financial loss through no fault of their own are being compensated.
“This really is a compensation scheme of last resort – these first four claimants had exhausted all other avenues and waited up to five years for a resolution.
“The CSLR claims team has been moved by the joy expressed by the scheme’s first claimants, some of whom were in quite desperate financial straits,” Berry added.
According to the statement, one of the first four payouts was over $50,000 to a couple from Queensland who were advised by a mortgage broker to take out a loan that was inappropriate for their circumstances.
The second claimant was a couple from Sydney’s south who received about $145,000 following inappropriate personal financial advice provided by their financial planner relating to a self-managed super fund.
Another couple from Sydney’s Hills District was paid $150,000 in compensation after receiving superannuation advice, which AFCA ruled was not tailored to reflect the couple’s circumstances or goals.
And lastly, a man from Sydney’s Northern Beaches received just under $17,000 in compensation after taking out a large loan on the advice of his financial adviser to invest in a scheme he was told had “guaranteed returns”.
Berry acknowledged “the financial support” that industry is providing to the compensation scheme through the levies on the sub-sectors, adding that these contributions ensure the scheme can both compensate eligible claimants and encourages industry to back stronger standards.
“It is important to note that the vast majority of people in the financial services industry act ethically and in the best interests of their clients,” Berry said.
“The CSLR is a genuine last resort for misconduct only, not for poor performing investments or people who ignore good advice and take undue investment risks.”
While CSLR levies will be collected from credit intermediaries, credit providers, licensees providing financial advice, and securities dealers, according to the costings released earlier this year, advisers are on the hook for the majority of the levy charged to subsectors. Namely, while financial advisers will be charged $18.5 million for the first year of the scheme, credit providers will only cover $1.5 million, credit intermediaries $1.8 million, and securities dealers $2.3 million.
The government has crowdfunded this compensation scheme, essentially slapping a fine on all the innocent advisers and people who weren’t even advisers at the time. This scheme is morally reprehensible, hypocritical and disgusting. The name is such a misnomer. It should be called “The Compensation Scheme of Second Resort”, CSSR. What Dixon won’t pay, every other adviser in the industry is expected to pay. Disgusting.
Only Canberra could manage to concoct such an inequitable outcome in the pursuit of achieving equity.
Another absolute joke.
Jones out, Labor out.
Every time I see an SMSF, I see someone handled client funds and committed fraud. All advisory AFSLs who do not handle client funds and SMSFs should be exempted from CSLR and the 2017 ASIC Supervisory Financial Advisers Levy ACT on financial adviser because we are contributing to this systemic risk where ASIC does not do supervision but only investigates after “the horse has bolted”.
I think we need to stand up as a whole and refuse to pay. This is 100% not fair and I fail to see how it is legal. There is no other industry but Financial Planning where this would stick. Out industry bodies need to object to this strongly and stand up for us for once. We took the brunt of what was not our fault in the Royal Commission as nobody helped us. We cannot continue to do this.
[i]”those who have experienced financial loss through no fault of their own are being compensated…” [/i]by advisers who are also at no fault of their own. Just shifting the buck to different innocent parties!
Berry acknowledged the financial support that industry is providing to the compensation scheme through the levies on the sub-sectors, adding that these contributions ensure the scheme can both compensate eligible claimants and encourage industry to back stronger standards. Hey David, you want to go & have a chat with Jonesy. He’s hell bent on reducing standards & supporting his major benefactors the industry super funds with his backpacker & “qualified (not qualified) adviser circus.
If these people have waited 5 years, but are making claims now, then does that mean the CSLR will just cover everything. Advisers today just paid for something that happened 5 years ago???
So what is the point of PI Insurance? are there any stats as to how much premium these insurers collect versus the payments they make?
PI wont pay if the premium isnt paid. PI works on a claims made basis, not when the event/loss occurred.
good to see we are now paying for the mistakes of mortgage brokers as well
this government has become a joke
dont think thats accurate
I’m still at a loss as to why their PI isn’t covering this. Why is everyone else who is doing the right thing paying for (quite literally and also with all of the extra regulations) those who are walking away virtually scott free. People think advisers are taking their clients for a ride… I’ve never seen an industry where the regulators and the powers that be try and rort its members so savagely.
Because the PI insurers have a team of legal people who are paid to fight against anything to protect the insurers. BUT, financial advisers are individuals don’t have the resource to fight against the schemes like ridiculous as CSLR, and easy to be picked on.
Financial advisers are screwed by the government!
true about the legal team, but before that happens, the premium has to be paid. Not sure crooks are worried about insurance premiums.
In what world is charging advisers doing the right thing to compensate for advisers doing the wrong thing. This is a criminal act in itself and we need to stand up and refuse to pay. We as business owners cannot afford to continue to pay more and more each year for doing nothing wrong. It is good to help out those who have had the wrong thing done, but don’t penalize the ones that did nothing wrong. We are all outraged by this and this should be stopped.
The industry must start campaigning on this issue in Stephen Jones’ seat and build it nationally in time for the federal election. He must be shamed publicly for the damage he has done to our industry.
It is estimated that the 4,214 credit intermediaries will have to pay a minimum levy of $100 plus $33.85 per credit representative for the Compensation Scheme of Last Resort, on top of other levies already placed on the industry (such as the ASIC levy and AFCA costs).
Makes sense….we now cover dodgy mortgage brokers – disgusting!!
The scheme is not set up purely for misconduct. Read the legislation guys.
I’m sure the CSLR claims team were moved by the reaction from the recipients. It must be very satisfying giving away other people’s money without having any skin in the game yourself. Sounds like a Federal or State Government Treasurer!
Still not sure why i should have to pay for these payouts.
If I ran a restaurant and went under, owing thousands of dollars to staff, It wouldn’t be expected that the remaining restaurant owners would have to cover my bad business practises.
Great analogy.
I wasn’t aware the mortgage brokers will also be paying into the CSLR? If this is correct, the amount that Financial planners are being asked to pay should be reduced significantly and if not, CSLR should not be paying claims brought about by mortgage brokers – confused as always!
Good point why isn’t the levy cost allocated across this sector ?