The Institute of Financial Professionals Australia (IFPA) shared its concern about the retrospective aspect of the CSLR levy and the impact the additional cost will have on advisers and clients.
The most recent CSLR levy estimate will leave financial advisers with an $18.5 million bill, equating to approximately $1,200 per adviser. Payment is expected in September 2024 and will cover the 2025 financial year.
The levy will fund claims from eligible consumers who have been the victims of financial misconduct and is estimated based on the date of the payment of the claim rather than date the claim is made, leaving advisers left paying for prior misconduct.
Natasha Panagis, head of superannuation and financial services at IFPA, said advisers should not be expected to fund compensation claims made prior to the establishment of the CSLR.
This is particularly problematic, according to Panagis, due to the inclusion of Dixon Advisory-related claims in the levy costs, even though the company has been in administration for more than two years and predates the establishment of the CSLR.
“We urge the government to remove the retrospective aspect of the CSLR levy by basing the levy on the date the claim is made rather than the date the claim was finalised,” she said.
“If the government wants advisers to remain in business and attract new entrants, it should not burden existing advisers with more costs and instead fund all legacy complaints that occurred before the CSLR scheme was set up.”
Panagis said the additional costs placed on advisers for previous misconduct by other industry members and organisations hinders the goals of the government to help bring down the cost of advice.
“The retrospective nature of the CSLR levy runs counter to the government’s Quality of Advice Review objective, which is to make advice more accessible and affordable for all Australians,” she said.
Noting the rise in the ASIC levy as well this year, Panagis pointed out that the added expenses placed on advisers will ultimately be passed on to clients, making advice more expensive and less accessible while also reducing the appeal of the profession to potential entrants in the future.
“At a time when there is a shrinking adviser pool coupled with the higher ASIC supervisory levy and other rising operating costs, advisers will have no choice but to pass this extra cost onto their clients,” she said.
“This extra cost is yet another hurdle that advisers need to overcome.”
Last week, Financial Advice Association Australia (FAAA) chief executive Sarah Abood expressed “deep concern and disappointment” regarding the added cost to advisers by the CSLR levy.
According to Abood, the retrospective nature of the scheme, leaving advisers to cover the cost of the Dixon Advisory “black swan” event and the shortened period to be covered by the government is cause for great concern.
“It is extremely concerning that because of these issues, the high quality and compliant financial advisers of today are being asked to fund compensation for the clients of Dixon’s, a firm which has been in administration now since January 2022 – over two years ago and long predating the establishment of the scheme,” Abood said.
There are currently almost 2,000 Dixon complaints lodged with the Australian Financial Complaints Authority (AFCA), the cost of which are expected to fall on the shoulders of financial advisers under the CSLR levy. The FAAA said the complaints should be classified as “legacy complaints’” and funded by the government.
“We are urgently calling on the government to remove retrospectivity by covering historical claims based on the date the claim is made, not the date the claim is finalised.”
Relating to the retrospectivity of this legislation, some of these comments/ators appear to have come down in the last shower. The establishment of the CSLR was first muted in the Federal 2021-22 Budget Mid-Year Economic and Fiscal Outlook and in the planning some 3-4 years before that. It has taken some 3 years for successive governments to finally get it established. Why call on blocking retrospectivity, when victims have been prey to disreputable Advisors for many years before that.
So why didn’t your Industry take steps many years ago to clean up its’ act, instead of turning a blind eye, hoping someone else would make the effort? Many of us have suffered because of that.
If you recall, as a much-lauded Financial Advisor spruiking his advice in all the TV, radio and newspaper media outlets for years, Daryl Dixon was the reason many invested with him as he was seen as someone “trustworthy” in an otherwise untrusted industry which included banks and other “reputable” Wealth Management organisations. It has been rife. I’ve been there and finally reached the conclusion to self-invest and manage my own retirement portfolio and am far better off. No use screaming to block retrospectivity now guys. Time to pay up I say.
Well we’ve seen this all before with Labor when FoFA was introduced. Every industry body but two, suggested an opt out system requiring a common sense simplified process of annually writing to clients requiring the client to notify the adviser if they wished to opt out. Yet Opt In was introduced based on the sole recommendations of Choice and Industry Super.
Yet some idiots believed Labor would be good for this industry. What we’re now witnessing is the continued destruction of Advice in this country and moving to a centralised Goverment run model via Union Super funds.
This was introduced by the Morrison Govt first before the election
Let’s face it. Regulatory burden is inversely proportional to professional qualifications. Until such time as all advisers have degrees, we will continue to wear millstones around our neck. ASIC has a job to do: obey their political master(s). Politicians have a job to do: get voted. Advisers have a job to do: put up or get out.
So does a retrospective claim then open the floodgates for other historical product failures or poor advice?
Imagine the speedzone is 80km/h and its changed to 60km/h a week ago. The police call you and say “we are going to fine you for travelling 80km/h in a 60 zone from 5 years ago.” Does that seem fair?
Yes that’s the idea. These are the guys that introduced the term Qualified Adviser to describe backpackers
The problem with the 2017 Industry Funding Levy ACT on financial advisers and soon CSLR, is that most of the independent advisers do not handle clients’ funds where virtually all of the funds are invested through platforms since 2013, their ASIC AFS license prohibits these advisers from handling client funds, advisers have no fiduciary obligations in investment management operations and receive no investment management fees, but advisers are burdened with the Levy from self-dealing frauds and negligence by those who handle client funds. Government Legislation has got it wrong to abuse innocent advisers with their existing clients for more than 20 years. Platforms are raking in big administration fees and face no risks, but they have the deep pockets to pay CLSR, not financial advisers who are scratching for survival on ongoing adviser services client fees, where their only fiduciary obligation is to their clients, not to free underwriting the Commonwealth Treasury Department’s fickle Legislation.
We must stand up and show our opposition to both the ASIC Levy and CSLR as they both contribute to the high cost of advice.
How do we influence political parties to counter the massive donations made by the banks?
If we are to succeed in influencing either party, you must do so at a grass roots level, for example we must attack Labor on Cost of Living as that is their Achilles heal right now.
The Liberal Party is also vulnerable on the same issue.
Unfortunately, our clients don’t necessarily believe that fees imposed on us will cause an increase in their fees. We know differently.
When we undertake reviews, we point out to our clients the high level of compliance we must undertake and the impact this has on their fees, however this will not change the voting intentions.
It is only personal safety, and the hip pocket nerve are the only ones that cause their vote to change.
Look at Queensland and you will understand why the Labor Government is in fear of losing office. In November 2024.
If we surveyed our clients and asked them which issues were important to them, I am sure that we would get a better understanding about the issues that really matter to them.
I urge all financial advisers to get behind the AIOFP in its efforts to influence both Labor and Liberals to reform our compliance nightmare.
Look at what Mortgagee Brokers achieved by being united.
To achieve a pollical outcome, we must offer our influence in exchange for what we want. This is what the Banks do and at present “The Banks tell the politicians to Jump and only response is How High”: The Banks buy these outcomes with donations…..
We cannot offer the Millions in donations; however, we may be able to offer either party Government.
Our clients are voters, and we have the capacity to influence them to vote one way or the other, by using our knowledge of what influences them.
Bennelong and Kooyong are good examples of our influence at work.
What can you do to help; Join the AIOFP and send a message to Canberra that we are united and a force to be respected.
William Mills Price Financial Intelligence
No, the AIOFP dont’ want people with degrees. The AIOFP has contributed to this hot mess by encouraging Advisers to vote for Labor, on the sole basis that he’d turn up and speak at his conference.. Under labor’s tenure we’ve witnessed the wholesale destruction of Advice. Introduction of the term Qualified Adviser, registration requirements, breach reporting, ASIC levy, GST removed on Advice Fees, AQF level 5 educational requirements for Super fund advisers whilst we’re doing AQF7, and now CSLR. Peter last email dribbled on about Josh Frydenberg. What is needed is all associations to state they have no confidence in the Government to implement reforms and they’re driving up the cost of living by implementation.
Agree 100% with this. AIOFP quotes are embarrassing and doing more harm than good. Last time it was get rid of Hume now it’s Jones’s turn. Bring back grandfathered commissions, no degrees needed just grandfather all the lazy Advisers who can’t be bothered studying and becoming a professional. No point being part of any association other than the biggest, the FAAA. They’re not much good either but if you’re going with one of the minority associations then it’s no different than voting for Greens or Independants….a wasted vote.