The Financial Advice Association Australia (FAAA) has nominated amending the Compensation Scheme of Last Resort (CSLR) as the issue the re-elected government must make its first priority with regard to the advisory sector.
“This does really need fixing. And there is urgency to this because the special levy for the next financial year, we’re concerned, could be quite substantial,” FAAA chief executive Sarah Abood told members during a post-election webinar held today.
“We know the sector cap right now is $20 million, although we’re advocating for that to be halved back to where it was originally proposed to be, but we know the cost for our sector is estimated to be $70 million.
“What will happen there is CSLR will do another estimate for 1 July and then the government, and specifically the minister, will need to decide what happens to the amount of the sector cap and that’s potentially $50 million.
“So that’s really important and sets a lot of urgency behind us trying to get results from the [existing] inquiries and asking the government for a policy position on where [it agrees] action needs to be taken and what is going to happen to amounts above the cap.
“So there’s definite urgency there and it’s number one on our list for the new minister.”
Abood pointed out the industry body is currently closely monitoring cases, beyond those of Dixon Advisory and United Global Capital, that have the potential to adversely affect the CSLR levy for financial advisers in future income years.
“The newer [situations] that we’re looking at firstly are the Shield Master Fund and First Guardian [Master Fund] scandals. Those [entities] are both in liquidation now and in each of those [cases] the FUM (funds under management) is approaching $500 million so the size of what we’re looking at here is pretty disturbingly large,” she revealed.
“Some of the platforms and licensees involved in those collapses are also in liquidation. One of them that has been referenced pretty frequently in trade press is Venture Egg, which is an InterPrac licensee. That firm alone has something like a $400 million exposure to Shield and First Guardian. So that’s pretty concerning.
“We don’t know how much of that will flow through to the CSLR, but obviously we expect that some of it will and that’s currently not included in the figures we’ve seen certainly for next year.”
