AIOFP accuses major parties of backflipping on CSLR

The Association of Independently Owned Financial Professionals (AIOFP) is concerned that the major parties are attempting to change the operation format of the compensation scheme of last resort (CSLR) due to their alleged “anti-consumer vested interests”.

The AIOFP is the latest industry group to express concern regarding the government’s decision to exclude managed investment schemes (MIS) from the Financial Services CSLR, tabled in parliament in early September.

Mid-September, the Financial Planning Association of Australia (FPA) called the move “disappointing”, while the SMSF Association expressed concern with the “enormous financial impact” failed schemes have had on consumers.

In its submission to government, the AIOFP raised similar worries, arguing that “to even suggest that MIS be excluded from the CSLR catchment is breathtakingly arrogant and disrespectful to all consumers”.

“Over the past 25 years, consumers have suffered at the hands of poorly managed financial products owned by the banks with many billions of their savings lost. These financial products are registered and released by ASIC onto the market as managed investment schemes with an accompanying product disclosure statement,” the group said.

“The banks past political strategy to deflect the blame onto advisers is no longer acceptable, they must now be held to account for their own behaviour to consumers both in the past, present and the future,” it continued.

“We believe holding banks to account and acting in the best interests of consumers was at the very crux of what Ramsey and Hayne were trying to achieve. It is now time for all Politicians to honour this position,” the AIOFP demanded.

The recommendation from the Financial Services Royal Commission was to establish a “wide-ranging” compensation scheme but, according to industry groups the government’s latest legislation doesn’t ensure consumers are covered by the full range of matters considered by AFCA, including MIS.

“While it was in opposition, Labor suggested amendments which would at least include MISs in the CSLR, and it is disappointing that these changes have not been included in the Bill,” FPA CEO Sarah Abood said last month.

“For example, most of the victims of the Sterling Group collapse would not be covered under the proposed scheme. This is also the case for most investors in the Mayfair 101 Group products. These products were often promoted directly to investors (using the wholesale/sophisticated investor exemption). These people have lost their life savings and in many cases are now completely dependent on the age pension.”

At the time, Ms Abood revealed that there is $3.7 million in unpaid AFCA determinations relating to financial advice due to insolvency, while MIS operators have $6.4 million outstanding against them, which, she said, highlights the need for the CSLR to be expanded.