Treasury confirms you will pay more for one-stop EDR

The Federal Treasury has confirmed industry stakeholders including financial planners will be faced with the costs of duplication created by the Government’s push to move to the Australian Financial Complaints Authority (AFCA).

A Treasury answer to a question on notice asked during the Senate Economics Legislation Committee inquiry into the legislation underpinning the AFCA confirmed there were unavoidable extra costs associated with the exercise.

The answer also seemed to confirm that the Government-appointed Ramsay Review panel which recommended the one-stop-shop external dispute resolution (EDR) body had been aware of the likelihood of duplicative costs but had failed to quantify them.

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The Treasury answer comes against the background of industry concerns that the transition process will see the industry paying for as many as four separate EDR schemes, and the likelihood that the Superannuation Complaints Tribunal (SCT) will still be working to clear its backlog of cases in 2022.

In the answer to the question on notice, the Treasury said the Ramsay Review did not quantify the dollar figure associated with duplication due to the existence of multiple external dispute resolution schemes.

It said, however, that the review had found there were duplicative costs:

  • For the regulator, the Australian Securities and Investments Commission;
  • For member firms; and
  • For industry and consumer stakeholders (for example, due to duplication of participation in reviews of schemes’ terms of references and guidelines).

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I guess this is just another cost to be passed through to consumers, rather than making more efficient, just load up the truck with higher and higher compliance costs eventually ends up with the client.

Dear Commonsense, not sure - I think it is more that every time costs increase less people seek advice. So eventually we will have everyone on the "age pension" and the "public purse". Not sure this will be a great result. I'm off to watch "Best Exotic Marigold Hotel" again.

I wonder what the cost of compliance is (including consumers having to pay more for advice, products etc) V's the losses to the consumer from non-compliant advice. Is the whole industry being killed by compliance? is this why 80% of people don't get advice? just wondering....

Having started reading all about the Australian experience when invited to speak at an event in Sydney, I was astounded by the similarities between your world and ours in the UK. When I asked UK IFAs what message I should take to our friends "down under", of all of the great and positive messages they could have chosen (and without knowing what developments were under discussion right now) they all said "don't let FOS / FSCS ruin their world like it has ours". Please take time to study what happened with the UK single dispute resolution scheme (Financial Ombudsman Service-FOS) and compensation scheme of last resort (Financial Services Compensation Scheme-FSCS) - and make sure for current and future adviser firms (and their clients) you do not just repeat the same mistakes. It sounds, unfortunately, like you're heading on your way there - but it's not too late to take a different path!!

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