The Financial Planning Association of Australia (FPA) is concerned that the government’s proposed model for a compensation of last resort (CSLR) scheme will not provide adequate protection for Australian investors in its current state.
In response to the release of the Senate Committee on Economic Legislation report, the FPA again called on the government to broaden the basis of its proposed CSLR to reflect the jurisdiction of the Australian Financial Complaints Authority (AFCA).
Sarah Abood, chief executive of FPA, said: “This would ensure the sustainability of the scheme for consumers and fairness for contributors.
“Victims of financial misconduct who have received a decision from the AFCA deserve access to compensation if their decision is not paid.
“In its current form, the model will limit consumer access to the scheme – leaving Australians unprotected if they invest in products such as managed investment schemes which later collapse.”
Abood said a number of recent investigations and instances of financial wrongdoing had further highlighted the inadequacy of the government’s approach in implementing recommendation 7.1 of the Royal Commission on misconduct in banking, pensions and financial services.
The FPA, along with fourteen other industry and consumer bodies, have advocated for the expansion of CSLR, and the Senate Economic Reference Committee’s own report on the Sterling Income Trust recommended the same.
“With the proposed CSLR model, the government has missed an important opportunity to ensure consumers of financial services receive adequate protection,” Abood said.
“It also failed to ensure that financial planners do not have to face all the costs of establishing and maintaining a system that will only do part of the job.”