Industry bodies say CSLR will ‘further reduce adviser numbers’

In a group statement released on Friday, Chartered Accountants Australia and New Zealand, CPA Australia, Financial Planning Association of Australia, Institute of Public Accountants, SMSF Association, Association of Financial Advisers, Stockbrokers and Financial Advisers Association and the Boutique Financial Planning Principals Association spoke against the draft legislation that has been released for consultation.

“All eight associations support a truly last resort compensation scheme. However, the associations do not support the way the scheme is structured to include AFCA’s outstanding expenses in addition to failing to address the causes of unpaid consumer compensation,” the statement read.

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“The associations are concerned the scheme may not be used purely as a last resort. This is a major and unwarranted departure from the Royal Commission’s intent.

“The Federal Government made a commitment to reducing red tape to cut the cost of doing business. The proposed scheme will add significant cost and complexity, which is at odds with this commitment.

“The draft legislation establishes a CSLR operator as a subsidiary of AFCA. This adds unnecessary red tape by requiring ASIC to administer invoices and payments and significantly increases the Government’s administration costs of the financial advice sector with little benefit to consumers.

“ASIC fees for financial advisers have increased by more than 230 per cent over the past three years. Most financial advisers are sole traders or small businesses who cannot afford the rising costs associated with increased regulation. Others are authorised representatives of groups who participate in other compensation schemes, which adds duplication.

“COVID impacts and Australia’s ageing population mean the nation’s advice needs are growing, yet escalating regulatory costs have already caused a mass exodus of advisers from the industry. The total number of financial advisers has fallen below 20,000 and will not be enough to meet this increasing demand. We anticipate the proposed scheme will further reduce adviser numbers.”

It comes after the draft legislation outlined that the financial advice sector would be forced to pay over three-quarters of costs within the first year of the scheme.

“The $12 million is in the first year only and includes the set-up cost. This is a large sum of money being picked up by the financial advice sector at a time when they are already under significant cost pressure” AFA acting chief executive and general manager, Phil Anderson, told ifa last month.

“To us it simply seems unreasonable that financial advisers should pick up such a large percentage of the costs of this scheme.

“The scheme provides increased confidence for consumers and should therefore work to the benefit of all sectors of the financial services and banking industries and should be funded on a broad basis.”