AIOFP calls on ASIC to help influence changes to ‘lethal’ CSLR

The Association of Independently Owned Financial Professionals (AIOFP) is not exactly known for its close relationship with ASIC.

Indeed, the relationship had gotten rocky enough that ASIC refused to participate in the AIOFP’s conference in Canberra late last year, leading to an empty chair on stage to represent the regulator.

However, AIOFP executive director Peter Johnston has singled out commissioner Alan Kirkland and chair Joe Longo as being uniquely placed to help “rescue” the advice profession and Australian consumers from the Compensation Scheme of Last Resort (CSLR).

In a letter to members, he said the scheme has the “potential to destroy the advice profession”, further limiting the ability of Australians to access high-quality financial advice.

According to Johnston, that’s where Kirkland and his “exquisite skills and experience” come in, pointing to his past role as CHOICE chief executive and as a panel member for the Ramsay review.

“No one has better credentials to rescue consumers and the advice profession from the scourge of the institutional lobbying power to avoid accountability and deflect their management incompetency blame onto other stakeholders,” he said.

“The current lethal legislative capacity of CSLR will wipe out the advice profession in the short- to medium-term unless all sides of politics understand the threat and are prepared to act.

“The ramifications for consumers will be severe, with the millions of Baby Boomers approaching retirement wanting and needing independent financial advice. With barely 11,000 practicing advisers left assisting around 2 million clients any further loss of advisers will be catastrophic for the millions of consumers needing assistance going forward.”

Johnston added that, ultimately, the increasing cost of the CSLR levy will find its way back to consumers in the form of higher fees, but also through driving advisers away from the profession and acting as a disincentive for new advisers.

“Simply put, the ASIC levy, CSLR Levy and the cost of PI Insurance upfront costs are literally strangling the advice profession, unless ASIC acts and assists the cause, there will be very little left to regulate in the advice space,” he said.

“It is time for the thinly veiled ‘them and us’ negative attitude between ASIC and the advice profession is put aside for positive humanitarian outcomes – it is that serious.”

ASIC should ‘publicly oppose’ CSLR

However, not all of Johnston’s comments about ASIC were positive, as he said the AIOFP is “disappointed that ASIC has not publicly opposed the CSLR legislative outcome at any point”.

“Considering ASIC are the gate keeper of all Financial Products entering the market through their MIS registration process, an interpretation could be that they are in favour of advisers being held responsible for the failure of products they allowed onto the market,” he added.

“ASIC is the regulator of the financial services landscape and for ASIC management to remain silent over a critical piece of legislation that heavily impacts consumers must be viewed with scepticism.”

Adding that, given his membership of the Ramsay review panel, Kirkland “could not be happy” with where the CSLR ended up, Johnston pushed for the ASIC commissioner to “educate all sides of politics on the foundation tenets of the Ramsay review” and the subsequent royal commission recommendations.

“Our legal advice clearly suggests that the only way to inject some fairness and accountability into the operation of CSLR is to amend the legislation to force product manufacturers into the ‘tent’ where AFCA can hold them to account over the performance of their own products,” he said.

“This will provide greater protection and security for consumers and save the advice profession from eventual extinction.”

While outgoing Financial Services Minister Stephen Jones has referred the CSLR for Treasury review, the executive director called this an “outlandish manoeuvre” that simply delays any action until post-election.

“If the Minister was serious, he would have suspended any further levies inflicted onto the Profession until the assessment was completed,” he said.

Johnston contended that getting bipartisan support for changing the CSLR settings ahead of the federal election is vital, calling on advisers and clients to put the issue to local members to drive attention.

“Once achieved, we need ASIC commissioner Alan Kirkland's consumer background and ASIC chair Joe Longo's influence to save the advice profession and assist consumers,” he added.

“The future of the advice profession and the protection of consumer savings are now more firmly and directly in the hands of politicians and the ASIC hierarchy like never before.”

Johnston said the AIOFP would also send the email calling on ASIC’s help to both Kirkland and Longo, as well as all members of parliament.