Small financial planning groups should be made to pay their way with respect to the introduction of any last resort compensation scheme, according to the Consumer Action Law Centre (CALC).
CALC chief executive, Gerard Brody has told the Senate Economics Legislation Committee inquiry into the establishment of the Australian Financial Complaints Authority (AFCA) that he did not think the big banks alone should be asked to fund a last resort scheme.
He said this was in circumstances where it was often the large providers that had the capital to compensate, “but, where there were independent or smaller financial advisers involved that were the cause of the poor advice, I think at the moment there's around $17 million worth of awards that have been made by [the Financial Ombudsman Service] FOS against such providers that haven't been paid because those businesses have gone insolvent”.
“…we think that all providers should contribute to the last chance compensation scheme—the smaller providers as well as the big banks,” Brody said.
“While the big banks might have the resources to compensate their customers directly, they also enjoy the benefits from an effectively regulated financial system and the confidence that the community has in such a system,” he said. “So we think it's fair that all providers should contribute to that sort of fund.”
Earlier, Brody told the committee that the model under consideration for a last resort compensation scheme involved an up-front levy paid by all industry bodies.