Over $360,000 has been paid to four claimants by the Compensation Scheme of Last Resort (CSLR) two months after the scheme commenced operations.
The CSLR said on Tuesday that three of the claimants were victims of poor financial advice.
“Whilst the financial services industry works toward the betterment of their clients it’s unfortunate that there are a few who take advantage of the trust bestowed on them. Ensuring some basic consumer protections works to lift trust in the financial services industry and the professions that support it,” CSLR chief executive, David Berry, said.
“This crucial safety net for victims of financial services misconduct is now in place and those who have experienced financial loss through no fault of their own are being compensated.
“This really is a compensation scheme of last resort – these first four claimants had exhausted all other avenues and waited up to five years for a resolution.
“The CSLR claims team has been moved by the joy expressed by the scheme’s first claimants, some of whom were in quite desperate financial straits,” Berry said.
According to the statement, one of the first four payouts was over $50,000 to a couple from Queensland who a mortgage broker advised to take out a loan that was inappropriate for their circumstances.
The second claimant was a couple from Sydney’s south who received about $145,000 following inappropriate personal financial advice provided by their financial planner relating to an SMSF.
Another couple from Sydney’s Hills District was paid $150,000 in compensation after receiving superannuation advice, which AFCA ruled was not tailored to reflect the couple’s circumstances or goals.
And lastly, a man from Sydney’s Northern Beaches received just under $17,000 in compensation after taking out a large loan on the advice of his financial adviser to invest in a scheme he was told had “guaranteed returns”.
Berry acknowledged “the financial support” that industry is providing to the compensation scheme through the levies on the sub-sectors, adding that these contributions ensure the scheme can both compensate eligible claimants and encourages industry to back stronger standards.
“It is important to note that the vast majority of people in the financial services industry act ethically and in the best interests of their clients,” Berry said.
“The CSLR is a genuine last resort for misconduct only, not for poor performing investments or people who ignore good advice and take undue investment risks.”
While CSLR levies will be collected from credit intermediaries, credit providers, licensees providing financial advice, and securities dealers, according to the costings released earlier this year, advisers are on the hook for most of the levy charged to subsectors. Namely, while financial advisers will be charged $18.5 million for the first year of the scheme, credit providers will only cover $1.5 million, credit intermediaries $1.8 million, and securities dealers $2.3 million.
