FAAA meets with Jones over ‘unsustainable’ CSLR

According to Financial Advice Association Australia (FAAA), Financial Services Minister Stephen Jones has “clearly heard” the concerns around the construction of the Compensation Scheme of Last Resort (CSLR).

On Wednesday, FAAA chief executive Sarah Abood and chair David Sharpe met with Minister Jones to raise the various issues with the CSLR, including the cost being imposed on financial advisers and whether it is actually operating as a “last resort”.

“We have told the minister that although we support the scheme, the funding model is completely unsustainable,” Abood said.

“The financial advice profession does not have the capacity to pay compensation to the clients of large listed entities which have done the wrong thing, and nor should we. We are looking at losses approaching $135 million for Dixon Advisory alone, with nothing in place to stop similar situations happening in the future.”

The minister, she said, has heard the concerns and is “genuine in his intent to work with us to ensure that the CSLR achieves the goal that we all support”.

“He has advised us that the FAAA will have the opportunity to work with Treasury to outline unintended consequences of the CSLR and listen to pragmatic and feasible solutions,” Abood added.

“We have also called on the government to pursue a public inquiry into what really happened at Dixon Advisory. With potential losses approaching $400 million, there is a clear public interest in understanding what has happened and how similar situations can be prevented in future.”

Last month, the FAAA called for a public inquiry into the circumstances that led to the collapse of Dixon Advisory, including how the impact of the scandal is flowing through into the CSLR and costing financial advisers.

FAAA general manager policy, advocacy and standards Phil Anderson said at the time that given the potential cost to the advice profession through the CSLR could reach $135 million, “our members are demanding to understand how this has got so out of control”.

“The answer is simple, it is all about the one entity – Dixon Advisory, which has generated a total of 2,773 complaints to AFCA, more than five times the annual number of complaints for the entire advice profession and multiple hundreds of millions of dollars in client losses,” Anderson said.

“How did things go so badly wrong? That is the question that we want to get to the bottom of. This is much more than just a few advisers providing poor advice. This is about an entire business that was focused on heavily selling in-house investment products, and one in particularly (URF), that turned out to be deeply flawed.”