Blake Briggs

Changes to the Compensation Scheme of Last Resort and expanded education pathways for advisers are among the key election policy priorities that have been outlined by the Financial Services Council.

In the FSC’s Federal Election Policy Priorities 2025 report released on Wednesday morning, the peak body for product manufacturers makes several recommendations for both political parties to consider before the upcoming election, due to be held by mid-May at the latest.

The report proposed the formation of a “red tape razor gang” responsible for “slashing inefficient regulation” and implementing the recommended reforms.

One of the policies in the report was a comprehensive review of the current operation of the CSLR to “ensure efficiency” and “prevent unsustainable cost for [the] industry”. Suggestions included reviewing the administrative costs of the CSLR and to consider appropriate capping of industry contributions to mitigate cost uncertainty.

The FSC has joined the chorus of those calling for a review of the CSLR with the cost of the scheme expected to blow out beyond the $20 million subsector cap when the FY26 is due to be announced.

The council had campaigned heavily during the early stages of the CSLR legislative debates to make sure Managed Investment Schemes, which are its primary member base, would be excluded from the remit of the bill.

The report also rejected the Australian Financial Complaints Authority’s ‘but for’ method in reviewing claims. It said consumers should only be financially compensated for their actual losses and not for “hypothetical foregone gains, which prevents the CSLR from being truly a scheme of last resort”.

AFCA has come under fire for its controversial ‘but for’ process which considers whether a claimant would have been a better financial position had they received appropriate advice.

This meant claimants may be compensated even if they had not suffered a tangible loss but could have simply been in a better financial position.

Lead ombudsman of investments and advice Shail Singh defended this methodology, saying it would only apply if the adviser had breached the Best Interest Duty.

Better pathways

The FSC report also called for reforms in the education requirements for advisers – such as to “increase the pool of relevant providers by updating the education standard and introducing new core knowledge areas for new entrants”.

The report said the core areas should include “commercial law, taxation, financial advice regulatory and legal obligations, ethics and professionalism and behavioural finance”, which is a recommendation from the Joint Association Working Group the FSC is a member of.

Furthermore, the report mentioned the controversial new class of advisers which will introduced in the second tranche of Delivering Better Financial Outcomes legislation, recommending the elected government consider the development of education pathways for the new class for them to become fully qualified advisers over time.

A spokesperson for Minister for Financial Services Stephen Jones confirmed to Professional Planner last year the new diploma requirement will need to be from a higher education provider regulated by TEQSA, but there is yet to be any legislation tabled.

The issues surrounding education requirements, the new class of advisers and the CSLR will be discussed by the industry’s most influential voices at the inaugural Professional Planner Advice Policy Summit, held on 10-11 February at Old Parliament House in Canberra.

Laundry list of financial reforms

The FSC’s overarching theme of the policies was to have both major political parties commit to an “economic growth agenda” and an “evidence-based tax review”, as well as no more reactive tax and policy changes to superannuation.

“Reforms to bolster the competitiveness and economic contribution of the financial services industry would contribute $19 billion to Australia’s GDP over the next decade,” FSC chief executive Blake Briggs said in a media release accompanying the report.

Other regulatory changes the FSC suggested included amending legislation to restore Reduced Input Tax Credits for superannuation funds and platforms on GST paid for financial advice, which was removed last year.

The change has since led to an adviser-led petition to have the RITC reinstated, which has been backed by the opposition.

Additionally, the report calls for a simplification of the breach reporting regime and said breaches which do not result in financial loss or damage to the consumer should be exempted from the regime.

The report said this change in breach reporting is estimated to save businesses $183 million in net compliance costs over 10 years.

The FSC proposed the introduction of a “product modernisation mechanism” that provides capital gains tax rollover relief for people to exit legacy products.

“This would enable the closure of legacy products and facilitate the movement of consumers into more modern, high-performing and lower-cost products,” the report said.

“By 2050, such a regime is projected to deliver an additional $16 billion to consumers’ retirement savings, increasing collective retirement incomes by $22 billion.”

Also suggested was avoiding “inappropriate expansion” of the Your Future Your Super performance test, launching a consultation to reform Design and Distribution Obligation rules, and introducing clear labelling for responsible investment products.

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