Adviser associations band together
Eight of Australia’s largest financial advice industry associations have joined forces to oppose the design of the compensation scheme of last resort, contained in draft legislation released for public consultation.
The Financial Services Royal Commission recommended the establishment of a compensation scheme of last resort to compensate consumers once all other avenues had been exhausted.
The ‘design’ of the draft legislation is what is being opposed. All eight parties support a truly last-resort compensation scheme, but do not support “the way the scheme is structured to include Australian Financial Complaints Authority’s (AFCA) outstanding expenses in addition to failing to address the causes of unpaid consumer compensation.”
Their concern addresses the issue that the scheme may not be used purely as a last resort. It may also make financial advice less affordable and accessible, while adding additional costs and complexity to the process. For an industry that has already seen a mass exodus of financial advisers, the proposed scheme will continue this downward spiral.
According to the media release, the group of associations is calling for the government to “amend the draft legislation to ensure the proposed scheme can only be used as a last resort, is appropriately calculated and applies to all financial service industry participants.”
The proposed scheme doesn’t apply to some industry participants, such as product manufacturers of poorly designed products that are destined to fail. When they fail, these product manufacturers walk away without contributing to the compensation scheme. Legislation should include all industry participants, they say.
The SMSF Association (SMSFA), Chartered Accountants Australia and New Zealand (CA ANZ), CPA Australia, Financial Planning Association of Australia (FPAA), Institute of Public Accountants (IPA), Association of Financial Advisers (AFA), Stockbrokers and Financial Advisers Association (SAFAA) and the Boutique Financial Planning Principals Association Inc. (BFP) are calling for the government to amend the draft legislation to ensure the proposed scheme can only be used as a last resort.