The SMSF Association has joined with 14 financial advice and consumer interest groups to call on the federal government to expand the proposed compensation scheme of last resort (CSLR) to cover all products and services overseen by the Australian Financial Complaints Authority.
The association made the call in conjunction with the Association of Financial Advisers, Boutique Financial Planning Principals Association, Chartered Accountants Australia and New Zealand, Choice, Consumer Action Law Centre, Consumer Credit Legal Service (WA), Council of the Ageing, CPA Australia, Financial Rights Legal Centre, Financial Counselling Australia, Financial Planning Association (FPA), Institute of Public Accountants, Super Consumers Australia and Uniting Communities.
A joint statement released by the 15 organisations noted the draft bill for the creation of the CSLR will exclude large segments of the financial services industry, including managed investment schemes and the funeral expenses industry.
As a result of this oversight, financial institutions offering those products will not be required to contribute to the costs of compensation impacting consumers in the event of a product or company failure.
Choice chief executive Alan Kirkland said the CSLR was a recommendation of the banking royal commission, but the proposed model did not go far enough in protecting consumers.
“When the government announced its response to the banking royal commission, we welcomed the commitment to establish a compensation scheme,” Kirkland said.
“Now, some 32 months since that commitment, the scheme proposed by the government is incredibly disappointing. It will leave too many victims of financial misconduct without access to the compensation they deserve.
“The establishment of a compensation scheme was one of the royal commission’s most important recommendations. The government’s proposals fail to live up to the spirit and letter of the royal commission’s recommendations.”
FPA chief executive Dante De Gori added consumer protections needed to be consistent, regardless of where people purchased a financial service or product.
“Consumers purchase financial services and products from a broad range of product providers, manufacturers and professionals,” De Gori said.
“They deserve the same protections and access to compensation, regardless of where they make their purchase.
“A last resort compensation scheme must operate equally and fairly across the entire sector to ensure consumers have faith in the system.
“The government must ensure that those product manufacturers who profit from consumers’ investments also contribute to compensation.”
