FAAA calls for fairer CSLR scheme ahead of Federal Budget

Ahead of the 2024 Federal Budget, the Financial Advice Association of Australia (FAAA) has called on the Federal Government to better manage costs across the Compensation Scheme of Last Resort (CSLR) and implement a fairer ASIC funding levy for advisers.  

In its pre-budget submission, the FAAA has put forward six key items that will have a positive impact on the financial futures of Australian consumers hit hard by the cost of living crisis.  

The FAAA says cost is continually cited as the number one reason why Australians don’t seek professional advice, and these measures will help by reducing the cost of professional financial advice, and making it more accessible and affordable. 

The areas of focus are: 

  • Implement a fairer ASIC Funding Levy  
  • Ensure fairness and manage costs of the Compensation Scheme of Last Resort 
  • Enhance tax deductibility of financial advice 
  • Enable financial adviser access to the ATO portal 
  • Provide more support for financial adviser education, and exam price relief  
  • Reverse proposed changes to Reduced Input Tax Credits for advice fees.  

FAAA CEO Sarah Abood says that as the peak-body for the financial advice profession, the FAAA aims to ensure that all consumers have access to high quality, professional and competitively priced financial advice that is in their best interests.  

“The FAAA remains very concerned about the fast-increasing cost of the ASIC levy. The financial advice subsector was charged in total $47.6 million last financial year – more than any other sector including super funds, listed companies, and life insurers. The per-adviser amount almost tripled, to $2,818 per adviser in the last year. These rapidly increasing costs are a factor in the increasing cost of financial advice to consumers. 

“Another concern with the levy is the unfairness inherent in a model in which the vast majority of advisers, who are running strong compliant small businesses and operating in the best interests of their clients, must pay for enforcement action against a small number of non-compliant businesses irrespective of whether that action is successful or not – because fees and penalties are paid to the government.  

“In addition, the costs of action against fraudsters and unlicensed operators ought to be borne across the entirety of the financial sector rather than the single financial advice sub-sector, as the entirety of the sector benefits from consumers having confidence that fraudsters will be actively pursued.” 

Ms Abood says on top of this, it is vital the government ensure fairness and better manages the costs of the Compensation Scheme of Last Resort, and a key issue is the retrospective nature of its operation.   

“The FAAA is calling for retrospective impact of the CSLR on financial advisers to be resolved. 

“The CSLR will be covering the cost of the Dixon Advisory failure although that entity was put into administration more than two years before the scheme was established. Government should ensure current compliant financial advisers are not paying for historical failures. The total cost of this single failure to financial advisers could be over $100 million dollars, and our sector simply does not have the capacity to cover this cost, nor is it fair or reasonable that it should do so. 

“In order to effectively manage the ongoing costs of the scheme, the government must ensure the groups that are responsible for these failures and their insurers are pursued to the full extent of their resources, before the broader profession is charged for compensation. 

“We are urgently calling on the government to remove retrospectivity by covering historical claims based on the date the claim is made, not the date the claim is finalised. We are also calling on AFCA to make clear the timing and circumstances under which Dixon’s membership of AFCA will cease. 

“In addition, the government should enhance the effectiveness of the scheme, and increase the confidence of the public in the financial system, by including MISs in the scope of failures covered.” 

The FAAA is also calling on the government to ensure that financial advice has tax-deductible status.  

“This will go a long way toward making financial advice more accessible for more Australian families,” Ms Abood said. 

“Government should act to make the cost of financial advice provided by a professional financial adviser fully tax deductible to consumers. Such a concession could be effectively targeted to those with the most need, and budget costs managed, in a number of ways – such as by introducing the deduction with a capped amount (such as $3,000) that could be claimed in a single year.”  

Ms Abood said the cost of financial advice remains the number one priority for FAAA members.  

“It is imperative that we reduce red tape and the cost of regulation in order to make financial advice more affordable. 

“Many of our members are sole traders or work in small and medium-sized practices, the cost of providing advice remains of high importance.  

“The FAAA continues to advocate on behalf of its members in developing policies and initiatives that contribute to providing an affordable, sustainable financial planning environment.” 

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FAAA calls for fairer CSLR scheme ahead of Federal Budget

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