In July, it was revealed in Treasury’s proposal that the sector would pay over $12 million of the $16 million levy cost in its first year.
After being tabled in Parliament late last month, Synchron’s Don Trapnell said the legislation – which aims to provide limited compensation where a determination issued by the Australian Financial Complaints Authority (AFCA) that relates to a financial product or service remains unpaid – should not have a single dollar funded for it by the advice sector.
“Last financial year, only 1.4 per cent of complaints to AFCA were related to advice, and of those, only 0.03 per cent were not settled, and yet the advice sector is expected to fund the lion’s share of the CSLR,” Mr Trapnell said.
“It beggars belief.”
Mr Trapnell noted that around 200,000 consumers lost more than $40 billion in failed or frozen funds between January 2008 and November 2021 and, because of this, said financial institutions that operate managed investment schemes should “pick up the tab”.
“On the flip side, the managed investment scheme providers, which have wreaked absolute havoc on consumers, will not be required to pay anything at all. It’s absolutely disgraceful,” he said.
“The government must stop making scapegoats out of the advice community, which is clearly not responsible for product failures and not responsible for the vast majority of AFCA complaints.
“A CSLR levy should instead be imposed on all new products and investment schemes.”
Mr Trapnell’s comments come after the Association of Independently Owned Financial Professionals (AIOFP) director Peter Johnston called for amendments to the legislation, including a change to the start date.
“The CSLR start date of 2009 is to help consumers defrauded by a poorly managed investment scheme, why does the Minister not want to help them? Surely the best interests of consumers comes first?” Mr Johnston said in an email.
Mr Johnston further argued that “trying to force losses” onto an adviser’s PI cover will only inflate premiums – a cost that would inevitably land on the consumer.
“It is time for the banks to be held accountable for their incompetence,” Mr Johnston wrote.
i agree with don Trappell. funds should pay part of this price – and of course will be passed onto consumers
I can’t wait for the Federal election.
When it comes to issues like this, Adviser don’t really care…it’s like FASEA they’re complaining about an exam in 2021 that was decided in 2016….This legislation, will change the focus from individuals going after the product manufacturer that failed or mislead the consumer, to going after the Adviser that recommended the product and this golden pot of money…and that compensation pot will just need to rise every year. Let’s also remember there is only 2 PI Companies operating in the Australian market and it would only take 1 product failure for them to pull the pin.
No household connected to the advice community should vote, or preference, Liberal at the coming election.
Each stakeholder needs to be responsible for their patch. The majority of complaints emanate from product, so make the product responsible.
We need more noise from the whole advice community, write to your local member and federal MP’s en masse.
They don’t care. By the way I have written to them.
Well said Don – have your comments made there way to the incompetents managing this in Canberra?
Don’t often agree with Don, but he is 100% correct on this occasion