The Financial Advice Association Australia (FAAA) has obtained documents under the freedom of information provisions that appear to indicate an impact analysis into the Compensation Scheme of Last Resort (CSLR) was not performed.
The analysis in question requires consultation with stakeholders, an assessment of the costs and benefits of the initiative, and consideration of the options available for the measure being put forward.
According to FAAA chief executive Sarah Abood, the omission of this step in formulating and implementing the CSLR has resulted in financial stress on the financial advisory community that could have been avoided had proper process been followed.
“There appears to have been no timely analysis done on the costs and benefits of the CSLR. Statements were made that the Hayne royal commission process was considered to be the equivalent of an impact analysis. We believe that this decision is deeply flawed and inappropriate in the circumstances,” Abood explained.
“The royal commission had a different purpose and was finalised over four years beforehand: well before the extent of the failings at Dixon Advisory were known and well before the legislation for the CSLR was considered by parliament.
“There appears to have been no attempt to calculate the likely costs to advisers who are funding the scheme or to assess whether these costs are affordable or sustainable, and the likely impact on the overall cost of advice to consumers.”
She described the discovery as deeply disappointing.
“We are calling for the government to acknowledge the scale of the exposure the financial advice profession faces and to undertake an urgently needed review of the CSLR legislation to ensure that the CSLR is fairly and sustainably funded,” she said.
This latest news comes as part of the industry body’s continued efforts to investigate the Dixon Advisory collapse and obtain a better understanding of how the CSLR was established.
“If the government is serious about ensuring the fairness and sustainability of the CSLR, it must act now to rectify the many flaws that have emerged since the scheme was established,” Abood noted.
The FAAA recently called for the Senate to allow clients impacted by the Dixon Advisory collapse to be heard as part of its inquiry into the situation.
