On Friday, Financial Advice Association Australia (FAAA) announced it had met with Financial Services Minister Stephen Jones to explain the considerable concerns that financial advisers have with the construction and implementation of the Compensation Scheme of Last Resort (CSLR).
Speaking with ifa, FAAA CEO Sarah Abood explained it was important that the minister understood the level of anger within advice as well as the funding model being fundamentally unsustainable.
“The thing just can’t survive unless the funding model is fixed, and we were very, very pleased to get a reception where the minister was open to that message and also accepting that there are things that need to change about the way the scheme is funded,” Abood told ifa.
“Hopefully, we’ll be kicking off that process with Treasury pretty soon.”
She explained that the association’s upcoming work with Treasury on the unintended consequences of the CSLR is going to need to see more than just “a few cosmetic changes around the edges”.
“We really do need to fix that fundamental flaw that a listed entity can put a subsidiary into administration, move the assets to another entity, and just keep going and walk away from all responsibility towards those customers,” Abood said.
“That is something that’s really fundamentally flawed and it needs fixing. I don’t think it’s going to be easy to fix, but we need to fix it.”
According to Abood, Minister Jones understands this “can’t be allowed to continue”, however, there aren’t any simple fixes.
“I’m not sure we’re going to be able to make root and branch train changes to the insolvency laws of this country anytime soon, but we certainly see options and ways that we can make this harder to do in the future, and we’ve got to do that,” she said.
“But there are also just technical fixes, areas where the minister, for example, can issue a regulation to improve the situation. Anything that doesn’t require an act of Parliament is going to be a short-term fix.
“We’re going to go through and kind of triage everything and work out what could be done now, what could be done by the minister, what will require legal change in our space, and what might need a broader discussion around how the laws need to change.”
‘Keep the momentum going’
The pressure from the advice profession over the CSLR has been growing in recent months as the financial impact on advisers and clients has become increasingly apparent. Letter-writing campaigns have looked to inform local members, with Abood noting that FAAA members have sent more than 2,700 letters to their local federal members and senators.
According to Abood, one of the big wins from the meeting was the minister’s “admission that this really is a problem” and he is “willing to devote time and resources to doing that and to hearing the recommendations”.
“That’s a big advance on where we were, and now we’ve got to keep the momentum going, make sure this process kicks off quickly and smoothly,” she said.
In terms of what she expects to come out of the process of working with Treasury, Abood said there needs to be an agreed set of issues with the scheme, and a “list of options for the government as to how these issues could be fixed”.
“What we don’t want is, ‘Oh, it’s all too hard’,” she said.
“We don’t think that’s going to be the outcome, but we’ve been really clear through this whole process that it has to be fixed. It’s not an option to just let it play out or see how the how things are going to go.”
FAAA chair David Sharpe, who also met with Minister Jones last week, said on LinkedIn that the association has been “calling ad nauseum for a fix to the CSLR problem”.
“The first step is acknowledging there is a problem to fix,” Sharpe said, adding that the minister was “candid in his acknowledgement there is a problem to fix and that the intent of CSLR was never for small business to foot the bill for large institutions”.
Acknowledging that the work with Treasury is no guarantee of success, it does ensure that FAAA members’ voices are being heard and can “hopefully shape an equitable outcome”.
“The minister is under no illusion that we wouldn’t be letting this go, that we couldn’t recall an issue in the last 20 years that equally united and incensed our membership. So, we move forward in good faith to deliver what we hope to be positive outcomes,” Sharpe said.
ifa reached out to Minister Jones for comment on the meeting, however, did not receive a response before publication.
Looking at how other Professional associations work overseas it’s completely opposite to what the FAAA does and I can appreciate why you Aussie Advisers are so over-regulated. My limited time here gives me enough information to think that this FAAA softly softly approach will no doubt see them end up working as a consultant with some Government body in year 3.
Advisers in Australia should start taking a leaf out of overseas associations. They wouldn’t put up with this.
The headline should read ‘Minister willing to devote time and resources to undermine advice as much as possible for the benefit of Industry Super.’
DO NOT PAY COMPOSLR FOR DODGY DIXONS MIS FIASCO.
Advisers and their AFSLs must on mass refuse to pay this Levy!!!
Let’s see Jonesy, ASIC, CSLR try to shut down the whole Advice Profession because :
– ASIC did nothing for 10 years and 60 complaints for Dodgy Dixon’s MIS
– AISC let Dodgy Dixon’s float on the ASX with full knowledge of the MIS fiasco
– ASIC let Dodgy Dixon’s 39 Advisers and 3,000 clients Illegally Phoenix to E&P for zero consideration.
– Jones, Big Banks, ASIC & CSLR fraudulently designed this Compo scheme to exclude MIS directly paying for their blowups
– Treasury employs Nerida Cole, an Adviser boss at Dixon’s that oversaw this MIS fiasco and think she should now regulate Advisers
– Treasury have back dated this 1 single MIS fiasco for the benefit of their own stupid staff the invested with Dodgy Dixon’s
– Jonesy & Treasury devise to not pay first 12 mths of CSLR like promised & only pay first 3 mths with the most pathetic 1 Dixon’s case paid for.
Dodgy Dixon’s CSLR cannot get any more corrupt, any more manipulated and any more beyond acceptable.
DO NOT PAY
WILL NOT PAY
OK Sarah – if you (FAAA) support CSLR but not the funding – then you get the Government to pay for it all – that way everyone else can figure out how to do a Dixon’s (and they didn’t take long to figure it out). Government Guaranteed Investment Schemes are what all investor’s dreams are made of right?
Really not sure what the FAAA is trying to achieve in their support for CSLR – make it a Government Compensation Scheme then we can all enjoy a Guarantee for investment losses?
According to Abood, one of the big wins from the meeting was the minister’s “admission that this really is a problem” and he is “willing to devote time and resources to doing that and to hearing the recommendations”.
And he was going to fix “this hot mess” pre-last election….and done nothing – would not think holding one’s breath is a good option!!!
Yes, it feels like Sarah is desperate to appear to be doing something – and has completely forgotten that Jones made these promises (2022) before CSLR passed in 2023. Sarah – what happened to fixing the hot mess – did she even ask?
It is very good that the FAAA is pushing Jones and standing their ground….but they MUST stand very very firm indeed and be immovable in not accepting any outcome that does not achieve what they well know is fair and reasonable to the Financial Advisers of the country.
The issue will really be how much time and how many resources will Jones be actually willing to dedicate to this process or is it simply empty lip service and promises to keep the issue at bay and to buy some time ?
Looks like Sarah’s opening line was “we support CSLR………….. but….. you pay” Jones reply – yeah sure, I’ll think about it – be right on it????? Sarah then goes to the press saying she is working for Financial Planners right? Jones then thinks? – it was only passed last year – what leverage does Sarah and the FAAA have now – they support it? FAAA out played again?
Seems Sarah and the FAAA are now using the resources of Financial Planner members to fight for something that happened on her watch?
I thought before the election, Jones’ was the Incumbent Minister Of Fixing Hot Messes ??
This is about the biggest “Hot Mess” there could possibly be, so he’d better put his Election Promise Hat on and get on with utilising the pre-election empathy he appeared to have with Adviser’s position and the abysmal state of Financial Services legislation and regulation.
Cunning Jones. He no like Peter from AIOFP.