FAAA urges Govt-funded CSLR voice for advice | Australian Markets

The financial advice occupation must be given a ‘friend of court’ voice when the Australian Monetary Complaints Authority (AFCA) and the Compensation Scheme of Final Resort (CSLR) deal with advice companies which have change into bancrupt, in response to the Monetary Recommendation Affiliation of Australia (FAAA).

What’s more, the FAAA needs the Commonwealth to fund the ‘good friend” regime as half of a formulation to deal with the issues now surrounding the CSLR.

In its pre-Funds submission filed with Treasury, the FAAA mentioned the Authorities wants to deal with the growing inequities within the CSLR by making it fairer and more equitable, together with making certain that any prices in anyone yr above the sector cap being paid for by the Authorities or unfold throughout all the industry.

“The government must make an immediate decision about what will happen to all costs above the $20 million industry cap to confirm that advisers will not have to cover the more than $70 million that is burdening the scheme currently,” it mentioned.

“In the context that the 2026/27 financial year is likely to be worse, action this year that applies in future years is critical. Should the advice profession be forced to cover this estimated $200 million over the next two years, this would amount to around $13,000 per adviser,” the FAAA warned.

“This is a huge disincentive for new entrants to enter this profession or for existing businesses to employ new advisers. Action from the Government that provides confidence to potential new entrants and existing practices is essential. This cannot wait.”

On the query of its really helpful ‘friend of court’ method to AFCA and the CSLR, the FAAA mentioned it was important that the occupation be supplied with a voice “where there is otherwise no-one left to speak on behalf of the advice given”.

“By bridging this gap, the initiative promotes accountability while reducing systemic risks associated with unrepresented claims, ultimately benefiting consumers and the broader financial ecosystem,” it mentioned.

“Within the short life of the CSLR, we’ve already noticed a quantity of financial companies going into administration or liquidation, leaving purchasers uncovered to a loss of investments and an incapability to make a declare to get better the loss. The CSLR has offered a pathway for these purchasers to hunt remediation, nonetheless this locations the CSLR in a place the place they need to then search restoration from the companies the place funds could also be out there or restoration motion could also be potential in opposition to the firm, administrators or officers.

“This activity, including the resources to investigate the underlying conduct, is important in seeking to minimise the cost to those who would otherwise need to contribute to the cost of funding claims paid by the CSLR.”

“The CSLR needs additional powers to undertake that activity, however we also believe that they need to be separately and appropriately funded to undertake this activity to ensure that those responsible for misconduct are held to account for their actions,” the FAAA submission mentioned.

“We imagine this position could possibly be performed by an entity established and funded by Authorities as a ‘Friend of CSLR’.

“We seek government funding to support the establishment of a ‘Friend of AFCA’ and a ‘Friend of CSLR’ role.”