‘CSLR is being implemented as legislated’, says Jones, quashing hope of changes

Following the Financial Advice Association Australia’s (FAAA) admission that Financial Services Minister Stephen Jones has failed to respond to the association’s “many” requests for engagement on the matter, ifa has learnt that for the minister, the Compensation Scheme of Last Resort (CSLR) is a sorted matter.

Last week, the FAAA estimated that due to an influx of new complaints related to Dixon Advisory, the financial advice profession will have to pay an estimated additional cost of approximately $65 million.

Speaking on the matter, FAAA chief executive officer Sarah Abood said: “The minister has not yet responded to our many requests for engagement on this matter, and we call upon him again to work with us urgently to find a sustainable solution to this crisis.”

ifa reached out to Minister Jones on Monday to find out whether he has an intention to address the matters raised by the FAAA. ifa also asked whether there will be a review of the associated costs, or if he intends to implement the levy on the financial advice profession as initially planned.

To these questions, the minister responded with: “The CSLR is being implemented as legislated last year with bipartisan support after almost a decade of consultation and discussion.”

Although not a direct answer to ifa’s questions, ifa feels it’s safe to deduce that the minister has no intentions in the present moment to make any changes that could help alleviate the CSLR burden on advisers.

Last month, speaking at an AIOFP dinner in Sydney, Minister Jones defended the government’s implementation of the CSLR, blaming the burgeoning cost of advice on the dwindling number of advisers operating in the country.

“We’ve got to find the right doorways to get people through and look at post-degree qualifications and the professional year and sort all of that stuff out,” Minister Jones said.

He added that the anger being directed at him regarding the CSLR is “fair enough”, but pointed out that the industry funding model is applied “right across corporate Australia”.

“If there are fewer bodies to pass regulatory costs on to, they’re going up,” he said.

“That’s the fact of the matter. So, if you’re looking at why your regulatory fees have doubled over the last four or five years, it’s because the number of advisers who are paying it have halved.”

The CSLR estimate released in March put an additional cost of $1,186 on each adviser for the first full-year period – starting from 1 July 2024 with payment expected in September 2024.

Combined with the ASIC levy of $2,818 per adviser, combined levies will leave advisers out of pocket just over $4,000.

The FAAA has now estimated that since a further 544 complaints about Dixon Advisory have been made since 15 February 2024, the financial advice profession will have to pay an estimated additional cost of approximately $65 million. This equates to a direct cost to every financial adviser of $4,165 on top of what has already been disclosed.

Although the cost per year on a subsector shouldn’t exceed $20 million, the legislation spells out that the CSLR operator will need to notify the minister if the levy will exceed that amount.

Click here to read more about the minister’s powers regarding this cap.

QAR delays

ifa also asked the minister whether the superannuation-related areas of the Quality of Advice Review (QAR) were contributing to delays, to which he responded with: “The government is focused on improving the quality and affordability of financial advice by cutting red tape on financial advisers that offers no protections for consumers.

“Legislation is being developed through 2024 to reform statements of advice and remove the safe harbour steps which will significantly drive down costs for financial advisers.”