No reason to expand CSLR: Hume

The compensation scheme of last resort (CSLR) should not be expanded to cover managed investment schemes or high-risk investments, according to Senator Jane Hume, and would likely make funding it more expensive, not less.

Addressing the Australian Financial Review Super and Wealth summit in Sydney, Hume, minister for superannuation, financial services and the digital economy, told delegates the CSLR should not be expanded to included a broader range of investment types.

“The CSLR is not an insurance designed to pay compensation to any consumer who has lost money in an investment,” Hume said.

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“It is only intended to cover unpaid compensation awarded because of misconduct relating to a targeted range of products and services.

“The CSLR will also not cover managed investment schemes or other high-risk financial products.”

Making the CSLR a broad-based scheme would mean higher costs for retirees and mum and dad investors, she said, and give a Government-backed guarantee for Ponzi schemes.

“Everyone who makes sensible, cautious, informed investment decisions would end up having their returns clipped to underwrite people who punt their savings on emu farms or tulips or other too-good-to-be-true high-return, high-risk investments,” Hume said.

“If you want to punt a portion of your savings on something speculative, knock yourself out. No government should stand in your way. But you should be prepared to wear it when it goes wrong.”

For those who had suggested a broad-based scheme would make it less expensive, she said experience in the UK had found its levy was forecast to be over £1 billion ($1.8 billion) a year, less than 10 years since it had been launched and compensation had more than doubled from £243 million in 2013 to £564 million in 2020.

“To those in industry who believe that expanding the scheme will make it less expensive, I say: be careful what you wish for,” she said.

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No one has suggested expanding it. We are asking that the funding of it be expended beyond just advisers. This is another of the spins governments are using.

Spin, or flat out BS? I would put Hume's comments in the latter category. It is bocoming a pattern now.

Just yesterday it was announced that only 1.8% of complaints are against financial advisers. Yet a scheme like this is being funded by advisers. Can Senator Hume point to any other situation where the smallest minority is being asked to fund the deeds of everyone else. It isn't fair and just shows the contempt Senator Hume and the rest of the libs have for the financial planning profession.

Yes I came to be same conclusion when I saw the stats the other day and you are right to call for a change in making the usual perpetrators pay up to the scheme. The other conclusion I drew is that advisors are doing a very good job with their clients.

Why aren’t Banks, Product Manufacturers, & MIS paying towards the CSLR ?
Because they provide massive donations to LNP.
Hume, Frydenberg & LNP are the most disgusting Anti Adviser, Anti Small Business Liberals we have ever seen.
I can’t wait to vote you out !!!!
I am actively campaigning against Frydenberg, Hume & LNP to all our clients.
I can’t wait to vote against the LNP for the first time in my life.

I can just see a bunch of CBA like executives sitting around the board table in five years time. "what do we usually do when we're on the front page of the paper following this product stuff up Michelle" ...."well Bob it states in the get out of jail manual to say... it's not us it's those nasty planners, a few bad eggs as step 1 and step 2 is repeat step 1" ......"but the problem Bob is they're no planners left to blame, we sent them all broke with those levies, PI Cover doubled following the CSLR and we replaced them all with Apps in 2023 remember Bob"

This stance should be unacceptable to the FP community and we should communicate clearly to the electorate our view. Surely a rather simple message to explain how 1.8% of advisers are being asked to cover the costs of the big bad banks is a fairly simple message to get across. Our associations should look at doing this before about March next year I reckon.

The Associations with the majority of Advisers don't solely represent you. They represent the Financial Planning industry as a whole and all of the participants in this industry. Not just advisers. Those Associations get big fat cheques, compulsory memberships and a list of advisers names in bulk from companies that are being excluded so they're not going to go hard on this. I suggest you either leave those associations, or write to your associations and demand conflict free representation, or write direct to your MP.

Yogi, can you please name names of these so-called companies that provide big fat cheques and compulsory membership to the FPA or the AFA, or in fact any association? I hear this coming from some sections of the "anonymous" commenters however as far as I was aware the banks (who I assume your inferring) have got rid of their financial planning arms? Stop living in 2016 and come up with better reasons why our financial representative associations do not feel the need to go hard on the Government and the product manufacturers as a whole. I'm sick of hearing the garbage that is conflicts - we've moved on.

Hi Geoff, I think you'll find those banks got replaced by large Super funds....Called AwareSuper. Have the payment of bulk memberships (one big fat cheque) been stopped? I'd really like to know please come back here and tell me please. Perhaps you ring up the CEO today and say, "Do you represent the individual adviser, do you represent the adviser working for Hesta, or Hesta itself or Australians" Very confident the response will be they don't represent you (an Adviser if so) or Australians.

Sorry guys, Hume clearly states it is targeted at bad/inappropriate advice only. So the only answer is NEVER recommend any investment that is risky...... Also take extra care to vet all clients. Avoid anyone who has unrealistic expectations, or who does not clearly articulate a risk profile acceptance, or who has health issues, or complicated situations or anything else that AFCA could use to say the advice was inappropriate. Good luck to everyone.

Once this CSLR is up and running, can we then have PI policies which cover next to nothing - saves a claim and the excess and simply let the CSLR pay up?

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