The Australian Securities and Investments Commission’s (ASIC) recent call for former Dixon Advisory clients to register any complaints with AFCA demonstrates yet again the need for establishing a broad-based Compensation Scheme of Last Resort (CSLR), says the Financial Planning Association of Australia (FPA).
Lodging a complaint with AFCA before Dixon’s membership ceases is a necessary step for clients to preserve their possible eligibility under a potential future CSLR, ASIC says.
However, the CSLR has not yet been established. In addition, the draft version of this scheme has a very limited scope.
FPA Chief Executive Officer, Sarah Abood, says:
“The CSLR needs to be urgently established. Yet the drafting we saw in the previous term of government, which lapsed in April this year, would not have covered Managed Investment Schemes (MISs). This would leave financial planners to foot most of the bill for a scheme that would have left the majority of affected consumers unprotected. For example, most of the victims of the Sterling Group collapse would not be covered under the draft scheme.
“At present there is $3.7 million in unpaid AFCA determinations relating to financial advice due to insolvency. Yet MIS operators have $6.4 million outstanding against them, almost double this amount. The total unpaid determinations are $14.7 million across all the areas AFCA manages.
“This makes it clear that the CSLR must extend across AFCA’s remit to achieve its aims of ensuring that victims of financial misconduct can be compensated where the firm involved has become insolvent.
“It’s also critical that the scheme be funded equitably, so that the current smaller number of financial planners, many of whom are small business operators, are not left bearing the full costs.
“While it was in Opposition, Labor suggested amendments which would include MISs in the scheme, and we look forward to seeing these changes implemented now they are in Government.
“We continue to work constructively with the Government, consumers and other stakeholders in the sector to deliver certainty and fairness for the financial planning profession and ensure consumers can have trust in the financial system.”