Documents obtained by the Financial Advice Association Australia (FAAA) under Freedom of Information (FOI) reveal that an Impact Analysis into the Compensation Scheme of Last Resort (CSLR) – a process which requires consideration of the options, assessment of the benefits and costs, and consultation with stakeholders – was likely not undertaken.

The heavily redacted documents were provided to the FAAA more than four months after being requested under the Freedom of Information act, despite the legislated timeframe to process a response being just 30 days.  

Sarah Abood, FAAA CEO, said the apparent lack of any Impact Analysis being conducted during the scheme's development has led to substantial financial strains on the profession which should have been foreseen and could potentially have been avoided if a proper Impact Analysis had been undertaken.

“There appears to have been no timely analysis done on the costs and benefits of the CSLR. Statements were made that the Hayne Royal Commission process was considered to be the equivalent of an Impact Analysis.  We believe that this decision is deeply flawed and inappropriate in the circumstances. The Royal Commission had a different purpose and was finalised over four years beforehand: well before the extent of the failings at Dixon Advisory were known and well before the legislation for the CSLR was considered by parliament.

“There appears to have been no attempt to calculate the likely costs to advisers who are funding the scheme, or to assess whether these costs are affordable or sustainable, and the likely impact on the overall cost of advice to consumers.  

"This is deeply disappointing. We are calling for the government to acknowledge the scale of the exposure the financial advice profession faces and to undertake an urgently needed review of the CSLR legislation, to ensure that the CSLR is fairly and sustainably funded.”

The FAAA has continued to investigate the circumstances surrounding the Dixon Advisory collapse and the way the CSLR was established.

Last year the FAAA met with Minister Stephen Jones as well as Treasury to continue work on fixing the unintended consequences of the CSLR and has played a key role in securing a public inquiry into the failings of the scheme.    

"If the government is serious about ensuring the fairness and sustainability of the CSLR, it must act now to rectify the many flaws that have emerged since the scheme was established,” Ms Abood says.

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