In its submission to the Senate Economics Committee inquiry into wealth management companies, the Financial Advice Association Australia has again criticised the government’s implementation of the Compensation Scheme of Last Resort (CSLR).
In particular, the industry body singled out three main areas over which it continues to have concerns.
The first of these is the retrospective nature of the measure. To this end, the FAAA is critical Canberra did not change the scheme’s start date even though six months had elapsed from the time the CSLR legislation was first introduced to parliament, 8 September 2022, and then reintroduced on 8 March 2023.
The failure to make this amendment meant an additional 1134 complaints were made regarding the Dixon Advisory collapse and will now be funded by financial advisers as opposed to the top 10 largest financial institutions as the legislation originally intended.
The FAAA also objected to the amount of compensation money the government ended up paying under the scheme as opposed to the original liability it was supposed to take on when the CLSR bill was first tabled by the Morrison government in October 2021 and the version tabled by the current Labor government in September 2022.
“[In both] it was very clear that the government would pay for the first 12 months of the scheme, in terms of both operating costs and claims,” it stated.
“When the legislation was reintroduced in March 2023, the way this was framed had changed and it allowed the minister to determine the start date of the scheme and thus the length of the first levy period which the government would pay for.
“The December 2023 freedom of information papers suggest at that time they expected it to be reduced to seven months, although later decisions reduced it to just three months.”
Finally, the peak financial planning body found fault with the way the explanatory memorandum for the legislation was drafted. Specifically, it noted flaws pertaining to the lack of reference to the Dixon Advisory collapse, the lack of any estimates as to what the CSLR will cost and the absence in carrying out any relevant impact analysis – an objection it had previously raised.
