The Financial Advice Association Australia (FAAA) is asking for urgent government intervention on the Compensation Scheme of Last Resort (CSLR), citing the unexpected scale of the levy and its focus on addressing legacy issues.
Joining the ifa Show podcast this week, the FAAA’s general manager of policy advocacy and standards, Phil Anderson, pointed out a number of issues regarding the manner in which the CSLR burden imposed on advisers has been calculated.
First and foremost, he said, advisers are being charged for legacy issues, meaning they’re being asked to cop the cost of complaints received against Dixon Advisory in the period preceding the royal assent of the CSLR legislation.
As such, the FAAA wants to see the government pick up the entirety of the legacy Dixon Advisory matters.
“The business went into administration in January of 2022. The legislation for the CSLR was not passed until June of 2023, so nearly a year and a half later. It received royal assent in early July of 2023. We do not believe that this legislation should be applied retrospectively, and if we are required to pay for complaints that were submitted after the 7 September 2022, but before the legislation was passed, we think that’s wrong,” Anderson said.
“We think that there should not be a retrospective application of the law here. The vast bulk of those post-7 September 2022 Dixon complaints were received in September and into October of 2022. If you take out all of the Dixon Advisory matters, that would be a good outcome. That would significantly reduce the cost. But we would certainly argue that we should not be paying for Dixon Advisory matters that were received prior to royal assent in July of 2023.”
The bottom line, Anderson said, is financial advisers are “paying for stuff that we thought would be picked up by the government in the first year of the scheme”.
Namely, the government had at the onset of the scheme committed to paying for the first year of the CSLR’s operations, however, it is now absorbing only three months of costs.
“The original proposal was that the government would pick up the cost for the first 12 months of the scheme. In reality, they are only picking up the cost for the first three months of the scheme. So the scheme only opens on the 2 April and then the first period runs to the 30 June,” Anderson said.
“So, the government gets off almost scot-free because of a combination of factors, the combination being this huge number of complaints that AFCA has to deal with and the time it’s going to take them to deal with that, and also the fact that they have truncated that first year period down to just three months.
“So, when we look at this, we’ve got the 10 largest financial institutions paying $241 million for complaints from the commencement of AFCA in November of 2018 through to the 7 September 2022. We’ve then got this period of time that the government is responsible, but it is in the end, it turned out to be only three months and are only paying 4.8 million. And then there are all these remaining post-7 September 2022 Dixon Advisory complaints that go into another bucket, that gets paid for by the advice profession.”
Moreover, Anderson pointed out the cost will only get higher in financial year 2025–26. Namely, according to estimates drawn up by the Actuaries Institute, AFCA will need until the March quarter of 2026 to complete the processing of legacy Dixon Advisory matters.
“We are talking about the prospect of an even larger number in the financial year 2026,” Anderson said.
“So, this is an issue that we need to argue strongly for, not only this year or the year that’s coming up, but the following year. So, it’s not just about $1,200. It’s probably significantly more in the 2026 year that we certainly want to see the government come to the party on.”
To hear more from Phil Anderson, click here.
All members of FAAA and SPAA should refuse to pay the CSLR levy. Name another Industry when the remaining members have to pay for the mistakes of those gone. Are builders and tradesmen asked to pay the bills of other Builders that have gone broke? It is time for the remaining 16-17,000 qualified, experienced and ethical advisers to ban together, as say NO. Enough is enough.
T think IFA needs to update it’s comments on a much more regular basis.
I also think IFA is blocking commentary that is pertinent, not abusive or unacceptable because it may not meet IFA’s agenda.
Lets see if this comment gets up and lets see a better service provided by a publication entitled
Independent Financial Adviser.
Fin Planners and accountants are easy targets. The govt wants super and savings to go to the industry funds.
The govt just need to come out and tell us to nick off.
No one will notice or bat an eye lid
I am not an adviser in any way shape or form, but I cannot believe this is happening! On what planet does it make sense to charge advisers for the misdeeds of others, let alone retrospectively!!?? Whichever body it is that represents you should make a bee line to wherever they need to, to get this reversed. Ludicrous. I sincerely hope this is sorted out
Phil, it is now time to lodge a formal complaint with the Australian Human Rights Commission in relation to unlawful discrimination under the anti-discrimination legislation.
The time for any further negotiation or discussion is over.
Over the last decade, Financial Advisers have been unfairly discriminated against in relation to legislation.
This latest attack is clear evidence there is no change in discriminatory behaviour, in fact this confirms it is worse.
It is time to stand up and let the Govt know that we will no longer be treated like second rate citizens in this country and continue to be kicked by a biased & openly discriminatory Govt.
BEST RESPONE EVER!! And 100% TRUE. We should have gone to the HIGH COURT for the illegal removal of Grand Fathering simply out of principle. When nobody did a damn to stop them they knew they could steam roll over us with what ever they wanted or dreampt up.
Sickening.
Here is an idea: put the levy away to fund a civil case and then refund it to advisers once those responsible are held fully accountable for their actions and mistakes.
No, they would win the case and then put the funds into general revenue. Advisers foot the bill not the benefit. Thats the ASIC way.
There will be a tipping point.
And that point will be when advisers cannot raise fees any longer because they look ridiculous.
CSLR will NOT apply to “Qualified Advisers”
The FAAA are, for once, correct – the CSLR should NOT be accommodating the Dixon fiasco, which occurred before the legislation existed. And retrospectivity also applies in the case of the ASIC levy, where I am funding reparation actions by ASIC against organizations that no longer function in advice.
But making that case about the CSLR to this government, in the current manner in which the FAAA likes to engage, will get exactly nowhere. Blatant aggression is the key here, together with a serious campaign in the Senate.
There is a clear issue here about retrospective legislation and there have been many court cases on the matter over the years where governments have lost in the face of concerted, well funded, legal campaigns.
Stop the pussyfooting. Take the matter to the courts and through to the High Court to get a decision.
The FAAA & AIOFP have had more than ample opportunity to stamp their authority on this issue but instead, fiddled around the edges for fear of stepping on the Minister’s & Treasury’s toes. Unfortunately, this issue needs to fought in the courts otherwise the Gov will continue to use the profession as a doormat.
BTW, Dixons was Pheonix’d into Evans & Partners.
While we pay for the damage
None of this is making the originators of the problem pay their fair share. This is disease created by product manufacturers who reaped huge financial benefits out of it, but being paid for by the health professionals, advisers, who are seeking to deal with the disease.
Exactly how many product manufacturers are in gaol for what was never in the investors best interests?
None!
How many of their waterfront homes have been taken off them?
None!
Where are the fees charged offshore in relation to investment activities?
No one knows.
What has ASIC done about Dixons?
Charged $7.2M in fines and told investors to go and claim against a fund that will not be funded by product manufacturers to any great extent at all.
Where is all the money taken by Dixon etc form the float that was promoted by these suspect investment product manufacturing activities?
Where is Alan Dixon today?
Death by 1,000 cuts!
Just watch, I bet we will end up paying for the stuff ups and mistakes made by the new “qualified advisers” too.
Another example of this government trying to push advisers out of the profession, by making it too expensive for some to remain in the profession, but we must make advise more accessible to more Australians. Death by stealth.