Speaking at a Financial Services Council (FSC) breakfast event in Sydney on Wednesday morning, the shadow minister said he was “shocked” to even learn about the Compensation Scheme of Last Resort (CSLR) and that “people have to pay for mistakes of others”.
“It was crazy to me, but that’s where it’s at,” Howarth said.
The CSLR is currently in its second levy period, having already completed the pre-CSLR funding period, in which the 10 largest banking and insurance groups paid the initial $241 million, and the first levy period that saw the federal government cover $4.8 million from three months of the scheme’s operation.
The government was initially set to cover the first 12 months of the scheme’s operation.
“Some of the points that the Coalition have made and will continue to make is, firstly, the government, the Labor government, with the support of the Greens in the Senate, they need to stick to their word around paying for the first 12 months of it, because they’re not,” Howarth said.
“The government said that they would pay for the first 12 months of that cost, and they haven’t. They basically skipped it and paid for three months. That’s not good enough, and it goes to character and goes to can you trust.”
According to the shadow minister, it is unfair that the cost of the first 12 months is being “worn” by the advice community and other financial services sectors.
“The other thing around the CSLR is … the original intention was to have it capped at about $10 million per year, rather than the $20 million that it is,” Howarth said.
“But I think the Coalition would look at that, because if you capped it, it would sort of immediately reduce the fees back to about $650 a year, as opposed to what it currently is.”
Speaking with ifa in May, Financial Advice Association Australia’s (FAAA) general manager policy, advocacy and standards, Phil Anderson explained that while the sector cap is $20 million, the Financial Services Minister has a variety of options available to him to deal with a levy that would exceed the sector cap.
“He’s got power up to $250 million total spend to levy as he wishes,” Anderson said.
“He could attribute all of it to the advice profession. He could spread it over a broader base of sectors above and beyond those who are already covered by the CSLR, or he’s got the option to seemingly have CSLR pay out in instalments, so clients don’t get all of the money they’re entitled to in the one year.”
Received our AFSL notice today – I have no words for this. I have been in the industry for far too long and this has to be one of the worst “initiatives” as ASIC described it, that I have seen.
How about we promote & demand a:
PBCS = Politician & Bureaucrat Compensation Scheme for when they stuff up.
Like Robo Debt, clearly many Pollies & Bureaucrats totally stuffed up and caused mass stress, suicides and utter financial carnage on more than half a million Centrelink recipients.
How about ALL POLLIES & BUREAUCRATS pay $$$ thousands of dollars annually from their income to repay the Billion $$$$ compensation costs to tax payers.
Surely if Financial Advisers that had nothing to do with the Dixon’s fiasco have to pay CompoSLR.
Then the same type of Compo Levy scheme should apply to those in Canberra that make the rules.
How about Doctors pay compensation for when drug companies cause harm.
How about Accountants pay compensation for when companies and individuals dodge taxes
How about Lawyers pay compo for when criminals cause harm.
Promote how obscene such Compo schemes would be and thus how obscene the Adviser compo scheme is.
Along with the most stupid MIS that pay nothing.
Stay and they win leave and they win so sadly you can’t win either way…
It is very concerning that the shadow minister was shocked by how the CSLR funding worked. It was his government that introduced it and he would have voted for the legislation that introduced it. Is he saying he didn’t properly review the legislation he voted on?
He is shocked? Didnt this bloke vote for it?
Hey- we want the CSLR abolished and whomever the detriment falls onto they should have P.I run off cover to manage this for a maximum of 7 years period since the advice was provided.
This will remove the CSLR and all the other drama.
“The government was initially set to cover the first 12 months of the scheme’s operation.”
Yes, until Stephen Jones & Treasury realised the government would have to fund the compensation in relation to the Dixons fiasco. They are on record regarding this, so instead they changed the rules to cover 3 months of the CSLR, whilst being fully aware that the liability will pass straight to financial advisers. Pretty woeful effort from a politician who promised to reduce the cost of financial advice.
Jonesy has no idea.
He is drowning in a sea of regulatory crap and the Industry Super Funds are breathing down his neck like John Setka at a CMFEU end of year BBQ.