In a new paper detailing its grievances with the operation of the Compensation Scheme of Last Resort (CSLR), the Financial Advice Association Australia (FAAA) has continued to apply pressure on the government, which it said has “let the financial advice profession down in the design and implementation of the scheme”.
Many of the topics raised in the paper, such as the retrospective application of the scheme and the government only paying for the first three months rather than the initially planned 12 months, have been long-standing points of friction for the FAAA.
Indeed, even the details around the lack of a timely impact analysis, which was seemingly confirmed through freedom of information (FOI) documents obtained by the FAAA, are not entirely new.
The explanatory memorandum (EM) covering the CSLR bills directly states that the royal commission final report was “certified as being informed by a process and analysis equivalent to an impact analysis for the purposes of the government decision to implement this reform”.
According to the FAAA, this “excuse” is “totally unacceptable”.
“The letters patent for the Hayne royal commission required the commissioner to give consideration to the implications of any recommendations quite broadly,” the association said.
“There was, however, no impact assessment in the Hayne final report, specifically for the CSLR recommendation nor any other financial advice recommendation.
“The Hayne royal commission final report did not include any numbers at all on the cost of the CSLR or any reference to the impact on the cost of financial advice.”
Looking further into the CSLR bills’ explanatory memorandum, the FAAA paper said there is “absolutely no reference” to the Dixon Advisory collapse, despite earlier FOI documents released in December 2023 making it clear the government was “well aware of the scale of the Dixon Advisory scandal back in August 2022”, months before the EM was released in March 2023.
“It is difficult to comprehend that there was literally no mention of Dixon Advisory,” the paper said.
“This was an important bill, with significant financial consequences that was being tabled in the federal Parliament of Australia, with the politicians expected to vote and legislate a scheme that would involve hundreds of millions of dollars being levied on companies and individuals across Australia.”
While the EM did include a table on the financial impact, without the impact of Dixon being included, the FAAA said it is “quite meaningless”.
Writing on LinkedIn, Phil Anderson, FAAA general manager for policy, advocacy and standards, said only the government can fix the CSLR problem.
“We are firstly calling on them to commit to not charging the advice profession more than the $20 million sector cap in 2025/26 and then changing the law to overcome the design problems to ensure that it is equitable and sustainable,” Anderson said.
“The government have been aware of the problems with the CSLR for a long time now, yet have failed to take action. The advice profession cannot wait until after the election. The government needs to act now and commit to fixing the problem.”
Speaking with ifa on Wednesday, shadow treasurer Angus Taylor addressed adviser concerns around the CSLR, saying it is “really important that those who were responsible for doing the wrong thing are accountable for doing it”.
“It’s not clear to me that that’s been the case with the way this government has treated the CSLR,” Taylor said.
“Luke [Howarth] and myself will have more to say on this in the lead-up to the election. I think we’ve sent that strong message already and will continue to, but it’s an important area because it is affecting the profitability and attractiveness of being an adviser. I just think that’s really important.
“This whole question of how we attract good people to the advice industry and retain good people in the advice industry. It’s huge. And I’d like to think that one of the things that we can assume as a government is to make this a great industry to work in again, because it has been, and it should be.”
Earlier this week, shadow financial services minister Luke Howarth said the government relying on the financial services royal commission rather than conducting a timely regulatory impact analysis is “not surprising and financial advisers across the country are now wearing the consequences”.
“This poor process pales in comparison to the government’s total inaction since clear problems with the design of the CSLR were exposed at least a year ago,” Howarth said.
“The government has done nothing over the last year to address the CSLR’s cost blowout and excessive levies despite it being a major burden for financial planners and advisers. The next levy is fast approaching and there has been no solution offered up by Albanese’s minister.”
