Synchron Director, Don Trapnell is calling for an urgent rethink of funding for the Government’s upcoming Compensation Scheme of Last Resort.
In a statement Trapnell says the advice sector should pay “not a single dollar” towards funding the scheme.
He says that 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.”
“It beggars belief,” he added.
The statement says that the Australian Financial Complaints Authority received 70,510 complaints between 1 July 2020 and 30 June 2021, 997 of which involved advice. Of those complaints, 974 were settled.
It notes that Treasury’s Compensation Scheme of Last Resort Proposal Paper dated July 2021 revealed that the financial advice sector will be required to pay more than 76 percent of the estimated levies for the scheme (see: Legislation to Establish CSLR Introduced.)
“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,” Trapnell says.
He says an urgent rethink of CSLR funding is necessary.
“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,” he says. (Also see: CSLR ‘May be Last Straw’ for Advice Industry.)
“A CSLR levy should instead be imposed on all new products and investment schemes,” Trapnell states.
Don makes a very valid point and the Government needs to take heed of and make permanent changes, so there is a much fairer CSLR.
The Government is aware of the issues and can clearly see the negative impacts for all Australians, who due to thousands of Advisers exiting the Industry because it has become too hard and the cost of Advice rising to levels that excludes millions of Australians from being able to get Advice, has created a whirlpool that is leading to only the wealthy being able to pay sufficient fees to cover the growing cost to serve clients.
This is exacerbated with Insurance, due to an unwillingness for Australians to pay thousands of dollars for Insurance Advice.
A compensation scheme of last resort is sounding more appropriate for Advisers and Licensees who are buckling under the unbearable burden of complex Regulation and costs that do not need to be so high.
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