The government must “stop making scapegoats out of the advice community” and not force it to fund any of its upcoming Compensation Scheme of Last Resort (CSLR), according to a dealer group director.
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.
Neil is the Deputy Editor of the wealth titles, including ifa and InvestorDaily.
Neil is also the host of the ifa show podcast.
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