A year on from the Royal Commission’s final report and it’s fair to say the dust has yet to fully settle.
Treasurer Josh Frydenberg commemorated the anniversary of the report’s release by saying the Government was “on track to meet the accelerated timetable” for implementing the recommendations of the Commission.
In kind, shadow Treasurer Stephen Jones responded that this was a “marketing reaction to being caught out with only 6 of 76 recommendations implemented after 12 months,” adding: “They are still more concerned about the PR than getting the recommendations legislated.”
In the midst of all this, advisers have been trying to come to grips with what the industry will actually look like once the wave of post-Commission reform has crested. Of particular concern is the Compensation Scheme of Last Resort, recommended in the final report.
In the Government’s discussion paper, consultation for which ended this month, the idea was floated that the CSLR should be extended beyond “personal advice failure.” According to the Association of Independently Owned Financial Professionals, “this can only mean in our view factoring in a product failure loss solution with the scheme.”
Addressing this, the AIOFP said: “An aspect that is commonly lost on all concerned when product failure occurs is advisers have the personal relationship with the consumer and they, more than anyone else want to see their clients compensated.
“This dynamic may also explain why other stakeholders who have some direct responsibility for a product failure occurring can do whatever it takes to avoid accountability with a relatively clear conscience.
“We think this is due to having no personal connection with the consumer/client and the adviser is the only stakeholder left standing next to the client in their hour of need.”
Because of this, the AIOFP has recommended the separation of advice and product under the compensation scheme. Were this to be done, the AIOFP said, “the losses associated with actual poor financial advice will pale into insignificance against the $40 billion of failed Managed Funds since 1980.”
It remains to be seen how the Government will ultimately implement the CSLR, but do you agree with the AIOFP’s conclusions?
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