The Association of Independently Owned Financial Professionals has once again accused the federal government, including minister Jane Hume, of defying commissioner Kenneth Hayne’s recommendations by excluding investment managers from CSLR obligations.
According to AIOFP executive director Peter Johnston, while Mr Hayne wanted all managed investment schemes (MIS) and other bank products involved in the CSLR catchment zone, Ms Hume has done the opposite, excluding the allegedly largest perpetrators.
“Commissioner Hayne intentionally recommended a retrospective date for the commencement of CSLR to assist consumers who have lost life savings due to the incompetence of banks. The Commissioner also wanted all managed investment schemes and other bank products involved in the CSLR catchment zone to comprehensively protect consumer savings,” Mr Johnston said in a letter to MPs, seen by the ifa.
“Minister Hume however wants to defy Commissioner [Haynes’] recommendations by precluding banks and their MIS products from CSLR catchment and not backdating its commencement – an astonishingly conflicted position to take against consumer best interests.”
But the AIOFP has now gained some major backing. With the Senate inquiry into the collapse of the Sterling Income Trust due to commence on Tuesday (16 November), consumer groups, including CHOICE, are demanding one key change from the government – the inclusion of MIS to CSLR.
“Having CHOICE on board is a major plus,” Mr Johnston said on Monday (15 November).
According to the AIOFP’s extensive research, the results of which have been emailed to MPs, frozen and failed products managed by the banks have resulted in 200,000 consumers losing a total of $40.23 billion.
Some of the top losses include the Great Southern agribusiness, which swallowed $4 billion, followed by Storm Financial with $3 billion.
Commenting on these colossal failures on a recent episode of the ifa podcast, Mr Johnston touched on the unfair blame often pinned on advisers.
“The trouble is all these products have failed and they blame the advisers. So we say, ‘Hang on, we didn’t make these schemes. We didn’t manufacture them. We didn’t manage them.’ Everyone runs for cover and blames the advisers, which is just wrong,” Mr Johnston said.
The AIOFP has now been joined by other member organisations including CPA Australia, the Association of Financial Advisers and the Financial Planning Association in pushing for the expansion of CSLR’s remit.
In its submission to the Senate inquiry, the CPA expressed its concern that the scheme proposed in the bill tabled in Parliament has “significant short comings” and may not assist victims of Sterling Income Trust.
“The CSLR, as proposed, is too narrow in scope, appears to provide inadequate coverage to consumers and does not seem to address the underlying causes of unpaid determinations,” the CPA said.
“The narrow scope of the proposed CSLR means that MIS and other complex products are excluded.
“This exclusion will leave many consumers who invest directly into schemes such as Sterling First ultimately unable to seek appropriate compensation or redress in the event of a future collapse.”
As such, the CPA recommended the scope of the CSLR bill be amended to include all financial products to ensure all consumers who engage with a financial product, with or without seeking professional advice, have access to adequate compensation and redress.
However, to date, nothing has indicated that the government could be preparing to yield.
It might be useful if we had an ICAC federally. Love to understand why many of our Ministers worked for a bank and the took decisions to favour banks. Say LIF ( so banks got a good price when selling their life insurers) and of course FASEA ( designed to decimate self-employed advisers in preparation for robo-advised bank products). Robo advice does not need branches to see people. Then there is HOW a Commonwealth Govt could accept $11m from NAB, CBA & Macquarie to fund FASEA
This is not the only area where Hume has defied Hayne’s recommendations. Hayne recommended a [b]single[/b] disciplinary body, but Hume imposed [b]Yet Another[/b] Disciplinary Body.
Should this come to pass, there will be a whole lot of happy constituents.
consituents wont understand what we are on about
So a major part of a financial planner’s value proposition to a client is, ‘at least if you buy the product through us you can sue to get your money back, but if you go direct you can’t’. I tried explaining this to my husband and his jaw just dropped open!
All of the comments here are bang on.
As I have said many times before (and been pilloried for it)…while the Government distracts the advice industry with petty attacks on the Industry Super funds (why are they doing that? because they wipe the floor with the bank-owned funds of course)…they run massive cover for the banks and put all of the blame and burden of this bank-created debacle onto advisers.
The advice industry needs to constantly remember WHO CREATED THE AWFUL SITUATION we find ourselves in. Who? The banks and big wholesale product providers. Never forget that and never forget that the LNP will happily throw you under the bus to protect their paymasters. That fact will never change!
Investment managers have escaped squeaky clean thus far and there seems to be a very clear reason for it: corrupt government ministers. Corruption at the federal level is rife and will continue unabated while there remains no federal ICAC.
As a fully independent financial adviser, I often find myself differing in opinion with AIOFP. However in this instance, I am fully supportive of their position. Providing a financial product and providing financial advice are two extremely different things. To blame an adviser for the collapse of a financial product is like blaming a mechanic for a design flaw in a motor vehicle. Advisers can only provide advice based on the information available to them. If a product provider conceals information, or takes greater risks than they indicate in their PDS, or if they engage in fraud, or if a research house provides a rating that turns out to not be correct, how are these things the fault of the adviser – unless of course the adviser had (or should have had) prior knowledge of such. So in the same paradigm, why shouldn’t a product provider share in the same scrutiny (and culpability) as an adviser, or a research house for that matter!
Let’s also not forget, that many Agri schemes were touted and actively promoted (often by Accountants) as tax-driven schemes. Yet, as stated, Advisers often get the general blame.
incorrect. pushed by AFSL’s.
came with a tax deduction too, so the government is fully implicated in great southern et al collapses.
Realistically they were pushed by both accountants and financial planners because a lot of money was paid out for recommending crap investments. Luckily I believe we are moving past that as a profession but you will never eliminate or legislate away greed.
It’s hard to understand why Jane Hume is so keen to exclude the product producers from this legislation. Maybe they are big donors?
You ‘could’ be into something…
The AIOFP are really standing out as Advocates for Financial Planners. I don’t always agree with them, but I do admire there leadership. It’s what Australians and the Advice industry needs now…genuine conflict free representation and advocacy…A novel concept. Well done.
Wow, it’s almost like the Federal government is leaving itself open to being painted as defending scammers right before an election. I sure hope alternative political parties don’t hear about this.
Oh don’t worry…they will be made aware of this ‘oversight’.