Speaking on a Financial Services Council (FSC) webinar on Thursday morning, Stephen Jones said the Treasury review of the Compensation Scheme of Last Resort (CSLR) would put a “spotlight on some of the issues” with the scheme for the broader Australian population, with the minister outlining some of his clearest statements on the future of the CSLR.
As FSC chief executive Blake Briggs noted on the webinar, there has been a shift in the debate over recent months that has seen both major parties recognising that the scheme is “unsustainable as currently designed” and that reform is necessary.
However, Minister Jones was definitive that managed investment schemes (MIS) should not be among those reforms.
“I want to ensure that what’s occurring doesn’t become a backdoor mechanism to drag that stuff in,” Jones said in reference to MISs.
“The conscious reason for doing that, it was going to add a whole bunch of risk into a compensation scheme that I don’t think is sustainably manageable.”
It isn’t the only issue with the CSLR that the minister acknowledged, noting that while he believes there is a “broad consensus” on the need for a genuine last resort compensation scheme with an industry funding model, the reality of its implementation has been lacking.
“What I’ve seen emerge over the two years of the scheme’s operation, there’s some stuff that just doesn’t, in my mind, seem to be consistent with those objectives,” Jones added.
“You know, hypothetical losses, for example, and some other issues. It troubles me, and I think that could, if let run, that could well and truly get away with us and build irreversible unsustainability within the scheme.”
Stressing that the scheme needs to be “sustainable over the long term”, he stated that, as things stand, “I don’t think we have that right now”.
“We’re not trying to have a backstop, de facto capital, stable investment product that the scheme guarantees. So, let’s work through those issues. I’ve got some thoughts – but you know, they’re only my thoughts at this stage – on some things that we could do pretty quickly to improve the scheme,” Jones said.
“But again, I stress that point, we’ve got to have an open and deliberative process. If you are going to be altering rights, people have got to understand why and what the underpinning of that is.”
The minister’s position on MISs is at odds with much of the advice profession, which has argued that unless product providers are added to the CSLR, advisers will continue to pay for product failures.
However, the FSC has been a notable outlier on this position, previously arguing that it could actually “potentially increase the cost burden on financial advisers” and that there are “more appropriate mechanisms that could reduce the cost burden”.
On Thursday morning, Briggs expanded on the FSC’s view, saying that adding more sectors to the CSLR is at odds with the push to make it more sustainable.
“I think one of the things that’s lost in this public debate around [the CSLR] is if the focus is about how to get the cost of the scheme onto a more sustainable footing, to make sure it’s still there in three years, five years, 10 years’ time and retains public interest, it seems to be in conflict with the proposition that more sectors should be dragged into the scheme,” he said.
“I look at events like the global financial crisis and the investment losses that [were] incurred during that time, and I just can’t escape the logic that, there will be some black swan event in the future, and people will incur investment losses.
“If we even indirectly hold out the expectation that they can get bailed out for those losses, the $70-odd million scheme blowout that we’re seeing now will be many, many times larger in that sort of event, and will cost financial advisors and everyone else so much more than they currently facing.”
Jones replied that he “wholeheartedly agrees” with that position, signalling that there is little desire within the current government to change its mind on this position.
“Turning something which is, in theory, a good idea to something that works and is sustainable in practice is the challenge of government,” he said.
“We had a bipartisan agreement on what we legislated, but I think both sides, both parties of government, realised that we’ve got an issue here that we’ve got to fix because we don’t have stable settings.”
Unfortunately for advisers, Jones also noted that the CSLR is simply not an issue that has garnered widespread acknowledgement – something he believes the Treasury review could change.
“There’s a small group of people who are very small relative to the broad economy, who are very, very attuned to it because they’re paying levies,” he added.
“But more broadly, there’s not an awareness of the issue and the problem. Having a deliberative process that puts a spotlight on some of the issues enables us – by us, I mean more broadly, the stakeholders and the population at large – to say, ‘OK, that’s not what we intended’.”
Jones is flat-out lying, and he’s betting nobody digs into the explanatory material. The draft legislation clearly states that collective charging can fund retirement planning advice “to an existing member to consider whether another product offered by the fund would be suitable.” That’s not vague—it’s a green light for super funds to steer members toward their own products, like annuities, under the banner of “free advice.” This isn’t about helping retirees; it’s a sales funnel dressed up as a public good. Jones can dodge and weave all he likes, dismissing fears of bias, but the wording in the draft doesn’t lie—unlike him. Members deserve transparency, not a minister banking on their ignorance.
This is a lifeline for industry super funds to lock in members and push annuities. The “free advice” channel Jones is championing isn’t free at all—collective charging means every member pays for it, whether they use it or not. Oh, and the kicker? The costs of implementing that advice—like switching to the fund’s shiny new annuity—can also be collectively charged. So, if you’re a member who never asked for this “help,” you’re still subsidizing the fund’s product-pushing machine. It’s a blatant conflict of interest, designed to staple members to the fund for life while sidelining independent financial advisers who actually offer unbiased options. The ALP’s cozy ties with industry super are shining through here—this reeks of a favor to their mates.
Dropping this draft before caretaker mode is a calculated move. With an election on the horizon, the timing screams political payback—industry super gets a policy win, and the ALP gets their campaign muscle. Meanwhile, independent advisers are hung out to dry, facing a rigged system where funds can undercut them with “free” advice bankrolled by collective fees. The FAAA’s complaints are a start, but the advice sector needs to fight tooth and nail—this isn’t reform, it’s an ambush. If this legislation passes, it could gut a chunk of the independent advice industry. Time to call it what it is: a stitch-up that screws members and advisers alike while Jones tip-toes out the door.
FFS, we are paying levies that are predominately the result of large businesses deliberately acting in a way that should have meant their AFSL was cancelled before the issues came to a head, but weren’t due to the lack of action by ASIC.
As a result, these businesses have been able to structure and restructure themselves so their primary beneficiaries walk away with the money and the other advisers, who ahd nothing to do with it, are left to clean up the mess.
Treasury were aware of the impost the Dixon fiasco was going to cause but deliberately ignored it.
ASIC should be the one paying the clients back, not the advisers.
“…realised that we’ve got an issue here that we’ve got to fix…”
Jones is very good at mouthing platitudes like these. Unfortunately he has never had either the competence or the motivation to actually fix anything. That’s why he is resigning in shame.
Just consign the current CSLR model into a rubbish bin and start again. Surely there are enough wise people who can collectively come up with a new workable solution for all parties so stop trying to rip off innocent advisers!