The need for a CSLR was endorsed by Recommendation 7.1 of the royal commission final report. Now the Australian Lawyers Alliance (ALA) said the government must move quickly on implementing the CSLR.
“The government must move to implement this scheme as soon as possible,” said ALA spokesman and solicitor Josh Mennen.
“Because the proposed scheme is forward-looking, every day that it is delayed is another day of financial losses that wronged consumers may never be able to recover … The government committed to introducing legislation to enable this scheme by the end of this year after a number of horror stories were graphically exposed through commissioner [Kenneth] Hayne’s public hearings.”
A CSLR “would aim to compensate people who have been victims of misconduct and lost out through no fault of their own at the hands of financial services providers” – even if the firm is insolvent.
While the Australian Financial Complaints Authority (AFCA) has established systems to assist some consumers who are entitled to receive compensation as a result of previous wrongdoing, Mr Mennen said it does little to help consumers suffering through the current crisis as a result of bad advice.
“Financial advisers have long been incentivised through grandfathered commission structures and asset-based fees to invest their client’s funds into higher risk portfolios than is appropriate for their risk tolerance,” Mr Mennen said.
“This inappropriate financial advice often goes unnoticed until an economic crash and hundreds of individuals and families will now be reeling from the impact of losses incurred as a result of the current economic crisis.”
Both AFCA and the Financial Services Council (FSC) have endorsed the need for a CSLR, although the FSC wants to see strengthening of professional indemnity (PI) insurance requirements for financial advice licensees alongside any scheme.
Just read the news about McMaster’s legal spat, and Dover’s negligence action against three law firms.
It seems a better idea is a last resort compensation fund paid for by lawyers to make sure lawyers have enough money to pay the claims brought against them by financial planners.
Does Josh think this is needed?
Hey Mennen, as per the first comment the biggest shonks putting clients into high risk profiles are the Industry Funds (Not Advisers), Hostplus, etc with 93% Growth /Risky assets in their so called balanced fund.
APRA even did the research / heat map for you on the comparative excessive risk profiles the Industry Funds push to All default members.
Giddy up ALA there’s a massive pot of money and aggrieved members awaiting your slimey services
Fancy that. Josh Mennen who works for Maurice and Blackburn, Australia’s leading class action legal practice, trying to get the Government to setup a big fund so that his firm can suck some money out of it.
Quick, the ALA might lose a golden opportunity to build a class action and miss out on 40% of the proceeds – so disappointing that Billy Shorten isn’t at Kirribilli to help shore up the revenue streams of Slater and Gordon. Looks like you will need to go the normal track and earn you money rather than another government handout
Someone forgot to warn the truth not to stand between a lawyer and a honeypot of money.
Will the CSLR be there for those in default “balanced” industry funds with no fixed interest or cash allocations like HostPlus? It will be Mennen and his mates job to prove the risk profile was inapprorpiate, as investment returns do not really come under their juristiction.
Isn’t it funny most these people he refers to were happy to take 10-15% per annum for 10 years in the greatest bull run in the history of Australia and now cry foul when they have a year of losses.