The CSLR was a recommendation from the royal commission, which had pushed for a way for consumers to be compensated when they had experienced misconduct and lost out to a financial firm that was no longer able to pay.
In its submission to the government’s CSLR consultation, the FSC has recommended a targeted “mid-coverage” scheme, including the sectors which have historically had unpaid determinations – pointing to financial advice, investments and credit.
It has also called for sector specific funding, where each sector responsible for unpaid amounts solely funds the losses in its sector.
The FSC wants scheme caps, without any cross-subsidisation across sectors to fund losses.
But if the government does decide to go with a cross-subsidised CSLR, the FSC has said it should apply to a broader general levy funded by all Australian Financial Complaints Authority (AFCA) members, for a “General Levy Resilience Reserve”.
FSC chief executive Sally Loane said the government needs to address regulatory weakness, such as advice licensees being unable to meet their compensation obligations, calling it the most important step towards protecting consumers.
“With most of the historical unpaid determinations arising from poorly capitalised financial advice businesses, we want to see the introduction of adequate capital requirements and greater oversight of appropriate and strong professional indemnity (PI) insurance requirements for financial advice licensees,” she said.
“The introduction of a CSLR without strengthening the regulatory weaknesses in advice will result in an incredibly costly shortcut which won’t address the underlying issues leading to financial advice licensees failing to meet their consumer compensation obligations.”
She said her body has long had concerns around the “risk of moral hazard” from the scheme and wants to ensure it is “targeted, sustainable and equitable”.
“This means capping claims at reasonable levels, ensuring sectors which are responsible for the losses self-fund those losses and implementing a scheme without cross-subsidisation across financial services sectors,” Ms Loane said.
Further, the FSC has recommended unpaid determination data should be collected from the outset to enable the CSLR to move to a financial services provider risk-based funding approach as soon as reasonably practical.
Ms Loane added that Australia should look to overseas examples to avoid failure.
“We know the UK has a very big compensation scheme, which cost more than a billion Australian dollars last year,” she said.
“We must learn from the UK experience and address our regulatory weaknesses upfront otherwise we will have a scheme that will blow out in size and cost.”
Someone’s going to have to take the fall for the disaster that is the LIF and RC disaster. I don’t think its too hard to guess who the member CEO’s of the FSC are going to throw under the bus to save themselves
Ms Loane added that Australia should look to overseas examples to avoid failure. “We must learn from the UK experience”
AHAHAHAHAHAHA what a sick joke Sally. Funny isn’t it how you chose to deliberately ignore the UK experience when you ruthlessly campaigned for the LIF legislation to slash adviser income for the benefit of your conflicted members hip pockets. Sally No credibility Loane give it up.
Here comes another levy lol
The LIF which was supposed to “see better customer outcomes” has seen existing customers hit with 50% premium increases over 2 years. How would Sally Loane know anything about anything??
Yes Sally of course the FSC will blame the lowly Financial Advisers – as per ALWAYS.
Hey Sally, any of your FSC institutions involved in:
[b]”product manufacturers paying research houses to rate their products. This profoundly conflicted practice has been a major contributor to the $29 billion of failed or frozen funds since 2006″[/b][b][/b][i][/i][i][/i]
$29 Billion of past product manufacturers problems Sally !!!
And that’s before the $$$ Billions of FSC institutional Fees For No Service scandals.
Yep Sally i’d say the FSC Institutions have a massive amount to contribute and the lowly mid tier AFSL’s and little Financial Advisers SHOULD NOT BE LEFT holding the compo can that is majority caused by the institutions.
FSC has plenty of money now they have reduced commissions and fees paid to advisers but not reduced premiums for consumers… its members can afford it. they are a great lobby $$$$$ #consumersarethelosershere #bankshareswentupafterhayneroyalcommission funny that
Sally didn’t know what advisers were paid commissions for 12mths ago… I wouldn’t be listening to anything she has to say.
So i wonder who at the FSC worked out this approach for Sally Loane to go out and say it.
This is consistent with our Political Leaders who always approach our industry with a clear “Horse before the Cart” strategy – FSC, you should know better