Financial services compensation scheme of last resort
The Association of Independently Owned Financial Professionals [AIOFP] is a not-for-profit Association formed in 1998 to act in the best interests of its Financial Adviser [Adviser] members.
Inextricably linked to Advisers’ legal and ethical obligations is that they must act in the best interests of their clients. This relationship places positive consumer outcomes firmly within the AIOFP charter and objectives.
The Compensation Scheme of Last Resort [CSLR] is fundamentally a consumer-focused solution initially created by the Ramsey Reviews then perfected by Comm Hayne Royal Commission Recommendations in 2019 to protect consumers from poor financial advice and/or financial product failure.
We stress that poor financial advice AND product failure are two entirely separate issues that needs to be addressed in isolation from each other.
It should be noted that the Morrison Coalition Government pledged unconditional public support for Comm Haynes Recommendations on numerous occasions, which was met with similar bipartisan support from the then Labor Opposition.
Furthermore, CSLR was specifically mentioned in the 2019 FSRC – GOVERNMENT RESPONSE TO HAYNE RC Report by former Treasurer Frydenberg to implement it in the Royal Commission recommended format, and which, again, received enthusiastic bipartisan support. [see attached document]
The recent political backflips by both major parties over implementing CSLR in its original Hayne recommended form, raises serious concerns that anti – consumer vested interests are trying to change the operational format of CSLR to suit their own position, rather than that of the consumer.
Once the stakeholder structure of the Financial Services industry is examined there appears to be only one participant who will benefit directly from the three critical aspects being touted for amendment. This stakeholder are the product manufacturers which includes the Banks and Financial Institutions [the Banks]
The foreshadowed attempts by those interest groups to eliminate the 1/1/2008 retrospective date and replace it with a date of legislation, and further to seek to exclude Managed Investment Schemes [MIS] in the catchment zone, will disadvantage those consumers who fall outside that retrospective date, which in turn, will benefit the Banks.
Furthermore, the suggestion to cap the compensation level outside the current AFCA guidelines will again be detrimental to consumers and thereby benefit the Banks, whose liability exposure will be further reduced.
It is clear to most, that the Banks are the only stakeholder which will benefit from these attempted anti – consumer CSLR amendments.
It is time for all Politicians and Bureaucrats to also act in the best interests of consumers by firmly rejecting the 3 proposed CSLR amendments. After the unequivocal bipartisan support of CSLR leading into the 2019/2022 elections, we are somewhat bemused that this Treasury process is required or even necessary.
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The Scourge of Political Donations