In its submission about the scheme – which aims to meet the cost of unpaid AFCA determinations that arise as a result of a licensee being unable to pay or refusing to pay – the industry body cited the bill’s inclusion that financial advice sector would be forced to pay over three-quarters of costs within the first year of the scheme as a major issue.
“Costs which will inevitably have to be borne in large part by the consumers of financial advice who more than ever need high-quality reasonably priced advice, which has the potential to significantly reduce the government’s financial liabilities,” the submission, signed by chief executive Helen Morgan-Banda, read.
“This initiative is perceived by the advice profession as another example of oppressive regulation that comes on top of existing regulatory cost pressures, including the recent announcement of a substantial increase in the ASIC funding levy and the expectation of a further increase due to the single disciplinary body.
“It is time the government listened to the profession and the hard-working Australians they serve.
“Imposing yet another regulatory cost burden demonstrates a lack of awareness and understanding on the part of the government.”
The submission concludes that while the AFA supports the establishment of the CSLR, the cost and annual administration need to be “heavily reduced”.
“It is our view that a lot more work needs to be done to address all the issues, before this scheme is ready to be progressed,” it read.
“We would also request that additional analysis is provided on the level of unpaid determinations and the main reasons why they remain unpaid.”
It comes after the AFA, alongside seven other industry bodies, spoke out against the draft legislation earlier this month.
I cannot believe that the AFA, FPA and others can lend any support for this body at all. It defies logic that good advisers and their clients have to pay for the bad eggs in this industry. When are these professional bodies going to stand up and support those of us in industry who are desperately trying to do the right thing.
The fact of the matter is that the whole principle of Last Resort Compensation is flawed in my mind. It is making good advisers and their clients pay for the actions of others who have not performed in the manner expected by the industry or regulators. It is flawed that good advisers and their clients have to compensate people who are not their clients. This again smacks of contravening the sole purpose rule of Superannuation, which has not been pursued by APRA or ASIC under any circumstances.
When the Wallis Enquiry was handed down in the 90s, it led to the establishment of the SIS legislation. The Wallis Enquiry also recommended a Compensation scheme of last resort, but at that time Treasury and the Insurance and Superannuation Commission chose not to pick up this recommendation for the simple reason that it would make good operators pay for the failings and misdemeanors of bad operators. Quite simply this is a basic principle that it is unreasonable to make people pay for the wrongdoings of others.
We are all required to meet stringent compliance and financial requirements, and of course Professional Indemnity Insurance. The real problem in all of this is that ASIC is a regulator focussed on penalising rather than being a regulator which works closely with industry to develop best practices in financial advice. APRA has always worked with industry and the accounting profession to develop and meet best practice standards, but ASIC has never been a regulator like this, and the 2 regulators have never in the past been able to agree on how to manage the financial sector.
When the SIS legislation was developed, I went to the USA to see how they regulated their Pension system, but they, like ASIC, always focussed on criminal action which meant in every case the damage was done because their court action took about 5 years to be investigated and completed. In that time clients had long lost their money. That is ASIC today, and it is expecting the good operators in the industry to pick up the financial pieces. Why should our clients have to pay for the inadequacy of the regulator. If they worked closely with industry to build best practice, then regulation would be much less expensive and less necessary, and the bad operators could more easily be the focus of ASIC. The government needs to focus on the method of supervision/regulation rather than over-regulate the advice sector.
The problem is, that when bodies like these say “It is time the government listened to the profession and the hard-working Australians they serve” is that it’s taken by ASIC, Treasury, the Government, that it’s time they listened to the Bank and AMP…..end outcome is more regulation for us…..the FPA and the AFA have an image problem of being associated with those large insto’s. I think these bodies need a big clean out, a refresh, perhaps a merger or restructure, an amendment to their constitutions…take a leaf out of AMP even and change there name, don’t know but it’s not working for anyone.Secondly “the hardworking Australians they serve” that’s funny because they’re getting few and few by the day and are getting richer and richer
Bit late
They haven’t listened for at least the last 10 years, they won’t change with this. Another reason to leave.
that is good helen, enough is enough. they need to think through the issues and realise (again) this won’t be effective
The Liberal Govt has overseen the destruction and dismantling of the financial advice sector without any conscience whatsoever.
Scott Morrison and Josh Frydenberg have zero interest in the well being of this industry.
They don’t care and never will.
Frydenberg had been an absolute disaster for financial services and in fact had been an enemy of the industry despite being the Treasurer in a Liberal Govt who falsely claim they support small business.
Josh Frydenberg wouldn’t know what a small business was if it ran over him on the back of a truck.
It was bipartisan. Labor deserves 50%+ of the blame by forcing the Liberals on. Remember, supporting advisers was electoral poison.
Stop blaming the messenger just because they made a mess out of an impossible job.
Sorry, Liberal managed to engineer a huge increase in FUM for industry Super and eliminate much of the competition for Industry Super.
Liberal eliminated Commission for retail business, but maintained Intra Fund advice model.
Liberal paid ASIC $70,000,000 during the RC to investigate the 4 Banks and AMP – but no a dollar to investigate Industry Super.
Not many people have advanced the business of Industry Super more than Scott Morrison and Josh.
when 50% of Advisers blame Liberals and the other 50% blame Labor maybe it’s about time 100% of us start looking inwardly at the actions and advocacy efforts of those that claim to represent us.