Repairs to the flawed Compensation Scheme of Last Resort (CSLR) should be a top priority for the next federal government as its rising cost is suppressing the growth of the advice sector, according to the Financial Advice Association Australia (FAAA).
The association stated addressing problems with the CSLR was one of the top five issues its members wanted to see addressed by the next government alongside improved implementation of the Delivering Better Financial Outcomes (DBFO) reforms, the removal of red tape and more support for new entrants into the profession.
FAAA chief executive Sarah Abood repeated calls for the CSLR financial advice levy to be capped at $10 million and that as part of its operation practitioners were not forced to fund compensation claims related to product failures.
“These steps would go a long way to ensuring the CSLR achieves what it was set up to do without causing immeasurable harm to the financial advice profession and potentially failing consumers,” Abood said.
She said the levy was another barrier to new entrants into the profession alongside the cost of providing advice and the ongoing changes driven by the DBFO reforms.
“Paying a levy for the mistakes made by others before you even started in the profession is clearly a deterrent to becoming a financial adviser,” she added.
“Therefore, we are also calling for greater support for new entrants to the profession, including a flexible education standard, financial support from the government for the employers of professional-year candidates and reducing the cost of doing the financial adviser exam.
“These measures would go a long way towards streamlining the process for those wanting to become a financial adviser.”
The association’s recommendations were based on a member survey that highlighted the importance of quality professional financial advice for Australians, something that had been recognised by all sides of politics, according to Abood.
“While well intentioned, much of the legislation introduced since the Hayne royal commission has not hit the mark,” she said.
“It has ultimately served to drive up the cost of advice and made it more difficult for people to get the advice they need at an affordable price to manage their increasingly complex financial needs.
“Our future government needs to take substantive steps to fix the crisis in our profession.”