Blake Briggs, FSC acting CEO

Advice associations are continuing to push the government to include managed investment schemes as part of the compensation scheme of last resort, but product representatives have pushed back saying the advice industry owes a greater proportion in unpaid determinations.

Ahead of the committee, 15 advice associations and consumer representative groups banded together to unite for a broader CSLR.

However, the minister for financial services, superannuation and the digital economy, Jane Hume, pushed back at extending the CSLR to include MISs, saying the purpose of the scheme was not to protect investors from risky investments.

Speaking at a Parliamentary Committee, Association of Financial Advisers chief executive Phil Anderson was one of many to highlight there was never a suggestion that a CSLR should step in to cover consumer loss on investment performance.

Keddie Waller
Keddie Waller

“We need to be very aware when consumers are making investment decisions, they need to do that fully-informed and prepared to accept that sometimes investments do not perform as they had hoped, so this scheme is not to cover investment losses,” Anderson said.

Keddie Waller, CPA Australia policy adviser for financial planning, said there would be investors who invest in MISs that did not seek advice and it was important to consider the scope of the coverage to protect those individuals.

The exclusion of MISs was also of particular concern to the SMSF Association.

“Over the years, SMSF investors have suffered substantial financial losses because of the misconduct and subsequent insolvency of MISs,” Peter Burgess, SMSF Association deputy CEO, said.

He pointed to the example of Trio Capital which was the responsible entity of 28 MISs and exposed a “significant gap” in the compensation options available for advised and non-advised parties.

“This is particularly relevant to SMSF investors who unlike members of APRA-regulated funds are not eligible for compensation,” Burgess said.

Product pushes back

Product manufacturers, represented by the Financial Services Council, pushed back on what they should be responsible for.

FSC acting CEO Blake Briggs said that while it was good advisers who would be burdened with the levies, it was the advice sector that had the most unpaid determinations.

Briggs said the regime could be improved to make it true to label and make it a genuine last resort scheme.