The Compensation Scheme of Last Resort (CSLR) has made its first payouts to victims since launching earlier this year, with three claimants being the victims of poor financial advice.
The CSLR was launched in April and the organisation stated it expected to pay the first claims by the end of the financial year.
In a statement on 11 June, it said three of the first claimants were victims of poor financial advice.
“While the financial services industry works towards the betterment of their clients, it’s unfortunate that there are a small few who take advantage of the trust bestowed on them. Ensuring some basic consumer protections works to lift trust in the financial services industry and the professions that support it,” CSLR chief executive, David Berry, said.
“This crucial safety net for victims of financial services misconduct is now in place and those who have experienced financial loss through no fault of their own are being compensated.
“This really is a compensation scheme of last resort – these first four claimants had exhausted all other avenues and waited up to five years for a resolution.
“The CSLR claims team has been moved by the joy expressed by the scheme’s first claimants, some of whom were in quite desperate financial straits,” Berry added.
According to the statement, one of the first four payouts was over $50,000 to a couple from Queensland who were advised by a mortgage broker to take out a loan that was inappropriate for their circumstances.
The second claimant was a couple from Sydney’s south who received about $145,000 following inappropriate personal financial advice provided by their financial planner relating to a self-managed super fund.
Another couple from Sydney’s Hills District was paid $150,000 in compensation after receiving superannuation advice which AFCA ruled was not tailored to reflect the couple’s circumstances or goals.
And lastly, a man from Sydney’s Northern Beaches received just under $17,000 in compensation after taking out a large loan on the advice of his financial adviser to invest in a scheme he was told had “guaranteed returns”.
Berry acknowledged “the financial support” that the industry is providing to the compensation scheme through the levies on the subsectors, adding that these contributions ensure the scheme can both compensate eligible claimants and encourage the industry to back stronger standards.
“It is important to note that the vast majority of people in the financial services industry act ethically and in the best interests of their clients.
“The CSLR is a genuine last resort for misconduct only, not for poor performing investments or people who ignore good advice and take undue investment risks.”
So, the compensation tab is picked up by the good advisers, who have done nothing wrong. Seems like I too am experiencing “financial loss through no fault of my own”.
“$50,000 paid to a couple from Queensland who were advised by a mortgage broker to take out a loan that was inappropriate for their circumstances”. Do mortgage brokers even pay the CSLR levy? Or financial advisers expected to cover them now too?
If the advice was inappropriate, then why wasn’t it covered by PI.
If PI is not fit for purpose, then dispense with that requirement of having it.
If the people who received payment received poor advice, then why wasn’t this dealt with by AFCA? I suspect the COSL has a much lower barrier and just hands out money to any aggrieved party.