When Financial Services Minister Daniel Mulino announced that the costs for the $47.3 million special levy would be spread across the 23 retail-facing subsectors of the financial system last week, there were few that cheered on the decision.
However, the Institute of Financial Professionals Australia (IFPA) has welcomed the move, with its president Scott Heathwood saying it recognises the basic principle of personal responsibility.
“For too long, compliant advisers have effectively been treated as the chequebook of last resort for failures they did not create,” Heathwood said.
“Broadening the CSLR levy base is a sensible step that acknowledges the role of platforms, product issuers and other retail-facing businesses in the ecosystem that failed thousands of ordinary investors.”
He added that the cost pressures independent and boutique practices already face from regulatory, licensing and professional indemnity insurance are already significant.
“If government wants high quality, conflict-free advice available to everyday Australians, it cannot keep piling costs on to the very professionals who stayed within the rules while others pushed the boundaries. A broad-based levy that aligns cost with responsibility is a more disciplined and sustainable approach than treating advisers as an open-ended funding source,” Heathwood said.
The IFPA also said it would “participate actively” in the expected February discussion paper on longer-term CSLR funding settings, which the minister also announced last week.
“Over the past 25 years, the disintermediation of Australia’s retail financial services markets has delivered its greatest benefits to the largest institutions,” Heathwood said.
“While scale and market power have enabled big players to expand margins and influence, advisers have borne the brunt of relentless regulatory change, often at severe financial and professional cost. Despite these upheavals, the reforms have consistently failed to achieve their intended outcomes for consumers or the advice profession.
“We support a serious conversation about bringing capital providers, parent companies, and high-risk schemes properly into the frame. A principled safety net is one thing. A permanent bailout facility for poor behaviour is quite another.”
Following speculation that the government would target self-managed superannuation funds (SMSFs) for future CSLR shortfall levies, IFPA head of technical services Natasha Panagis said the possibility is deeply concerning.
“Unadvised SMSFs cannot lodge complaints with AFCA and advised SMSFs can only complain about services provided to the fund by an AFCA member, not the decisions of their trustees, meaning SMSFs remain ineligible for CSLR compensation,” Panagis said.
“Asking SMSFs to fund a scheme they cannot use amounts to double dipping when their adviser is already contributing. SMSFs already bear the full consequences of their own investment decisions and should not be made to subsidise misconduct in unrelated parts of the market. Expecting them to pay for failures elsewhere in the system is inequitable, inappropriate and simply unjustified.”
