While the Australian Securities and Investments Commission (ASIC) is expected to start issuing CSLR levy invoices in early August, there is still confusion regarding some of the mechanics of the scheme’s funding.
Speaking on the latest episode of The ifa Show, general manager for policy, advocacy and standards at the Financial Advice Association Australia (FAAA), Phil Anderson, discussed some areas of the CSLR that are still causing confusion among the advice profession and what could happen if the initial estimated cost is wrong.
Since the government’s initial announcement in March of the estimated $18.5 million bill for advisers to fund the first full year of the CSLR, many have been concerned about the impact the additional cost will have on the advice profession, particularly as it continues to struggle against over-regulation and the low number of advisers.
However, Anderson explained that the actual cost of the scheme remains a matter of concern as it was calculated “based upon estimates on data they had from December of last year as to the total number of Dixon Advisory complaints and how long it will take to process those complaints”.
“Now all of the complaints are in, but they then need to wait to see how many of them actually apply to get a CSLR payment. Many of them still have to go through the Australian Financial Complaints Authority (AFCA) assessment process. When I say many, the vast bulk of them still have to go through that process,” Anderson said.
While the 10 largest financial institutions have been billed a collective total of $241 million to cover pre-CSLR claims from the commencement of AFCA in November 2018 through to 7 September 2022, and the government has covered the first three months of the CSLR, totalling just $4.8 million, all future costs will now be laid upon financial services professionals, such as advisers.
“There is no mechanism for there to be an adjustment. What they’re paying is what they have paid and that will be the end of it. If it ultimately turns out to cost more for the pre-CSLR cases, then that’ll be rolled forward into future years to be paid. If it turns out to be less, then the CSLR will maintain a credit,” Anderson said.
He also noted that the CSLR operator has the ability to issue additional levies to cover the scheme, should costs exceed the initial estimate during the course of the year.
“If they originally estimate that, say, it was going to cost the advice profession $10 million in the year, and they got a barrage of additional complaints that would ultimately end up needing to be paid, then the CSLR can come back to us and issue us with another invoice,” he said.
“So, there is an ability to issue subsequent invoices if it exceeds the original estimate.”
Anderson explained that the CSLR levy differs from the ASIC funding levy in this respect as the latter is invoiced in arrears, providing an exact amount to be billed, whereas the CSLR levy is invoiced in advance, which makes it somewhat unpredictable.
However, it is important to note that the CSLR is still subject to the $20 million annual cap for each sector regardless if costs were distributed across multiple levies. Were it to exceed this amount, the matter would be referred to the minister to make a decision.
If they were to overestimate costs and the CSLR to be overfunded, Anderson believes the excess funds would not be redistributed, but would be kept as a credit for the following year.
“If they originally invoiced too much, I’m 100 per cent certain that they’ll hold onto that money and will offset it in future years. And that’s probably reasonable because there would be a significant cost in paying out a surplus amount, which would probably not be a very large number in the end,” he said.
“I’m sure that there’ll be some people who are unhappy because they left and they didn’t get their refund, but that hopefully is a minority. Hopefully we’ve got very few people leaving the profession and it’s more about people coming in.”
Can I issue an invoice for the amount of time I have to spend trying to deal with the asic connect portal when it doesnt work? Im just trying to run small practice and help people….most of which have never received advice before as the ones that have pre fofa are burnt due to vert integration. Separtae product and advice once and for all. Happy to fund a CSLR for true advice failures (they do happen in all professions). I will try again tomorrow if i get a chance…toss up between ticking bueratratic boxes or actually helping people. Reckon it is 50/50 at the moment. Could definitley help twice the number of people at the moment but are having to turn people away
It would be good to see FAAA use some of their significant cash reserves to run a campaign nationally to protest this. They have no spine. Slowly letting our profession die whilst building up cash for their future pay rises?
“I’m sure that there’ll be some people who are unhappy because they left and they didn’t get their refund, but that hopefully is a minority. Hopefully we’ve got very few people leaving the profession and it’s more about people coming in.”
I would say it is more like many would be unhappy than some and as for more people coming in than leaving that is just not going to happen anytime soon!
And what exactly is FAAA now doing to take the fight to Stephen Jones and overturn so many bad red tape regulations that continue to strangle advice businesses like a boa constrictor?
Answer : Not much as the FAAA strategy is to recruit more suckers to help spread the load of the Dixon disaster!
Most of the Dixon compensation claims should be excluded from the calculation. The majority of Dixon clients were Commonwealth public servants. Dixons were based in Canberra and the founder Darryl Dixon built the business by becoming the widely-accepted expert on the Federal Government super schemes and targeting public servants.
It has been acknowledged that some Dixon clients were ASIC and Treasury staff. Yet they failed to spot a risky investment with major conflicts of interest! And ASIC failed in its duty as a regulator to prevent the worst of the Dixon losses. It allowed the problem to become much bigger than it needed to be. We shouldn’t be paying for these losses.
The goose is being choked. Soon, no more eggs.
‘hopefully’.. words which shouldn’t even fall into a conversation such as this.
We are required to be transparent at all levels – such is the requirement of The Code of Ethics – a law.
The government (the lawmakers) aren’t even required to follow that same level of transparency which they require of us.