The Financial Advice Association Australia has conceded it has met a dead-end in an attempt to verify what steps the government has taken to identify all potential unintended consequences the cost of the Compensation Scheme of Last Resort would have on the profession.
In a public announcement, the FAAA said it had made a Freedom of Information request with the government last year to identify if a full legislative impact analysis on the CSLR legislation had been done.
“Our efforts have been subject to ongoing delay and now that we finally have the documents, many gaps and questions remain,” the association said.
The FAAA noted that when legislation is introduced to parliament, the minister is legally responsible for undertaking an impact analysis to consider the potential repercussions of the bill – including the costs and consequences of the law.
The responsibility for the oversight of this analysis is the Office of Impact Analysis and the Department of the Prime Minister and Cabinet (PMC).
The FAAA concedes that it might have passed through based on an “impact analysis equivalent”, which would’ve been due to the fact the CSLR was recommended by the Hayne royal commission.
But after attempting to find the impact analysis document online to no avail, the association requested the documentation through a FOI on 18 August 2024.
“We thought that this would be a straightforward exercise, as we were requesting documents that were required to be prepared and were required to be published,” the FAAA said.
“Under the FOI law, the government had 30 days to respond. As it turned out, it took substantially longer.”
The association was asked to approve a 30-day extension on 13 September 2024 by the PMC to allow more time to respond.
A month later they received a letter saying the application had been declined “as it would involve too much work” under the justification OIA records identified 188 items which potentially fit the request.
The association claims after five follow-ups with PMC that it received a FOI response on 7 January when it finally received documents which it said revealed “virtually nothing”.
“It appears that either effectively no analysis was done of the cost of the CSLR for the financial advice profession, or that steps have been taken to avoid disclosing what was done,” the FAAA said.
“This is a totally unsatisfactory outcome. We expect the government and the parliament, when proposing legislation with broad implications, to go through the proper process and do the work necessary to understand what impact it will have.”
Professional advisers and other industry participants will have the opportunity to discuss the policy settings in the sector, including the CSLR, at the Professional Planner Advice Policy Summit on 10-11 February at Old Parliament House in Canberra.
The CSLR has long been polarising legislation in the industry – while the FAAA themselves have been supportive of the scheme in principle they’ve also been critical about the funding mechanism which is reliant on industry. This was further compounded by the hundreds of millions likely to be covered to remediate victims of Dixon Advisory.
Pitched during the Ramsay Review and recommended by Commissioner Kenneth Hayne, the scheme failed to pass parliament before the 2022 election due to disagreements over whether managed investments schemes should be included, which Labor initially argued for.
After winning the election, Labor backed down on including MISs, passing the bill which would require the government to cover the first year of the scheme.
However, the “first year” turned out to cover only three months. The scheme did not commence until the final quarter of FY24 with government only covering what fell in the financial year.
Instead, remediation for Dixon would largely fall out of this window – as well as the $241 million pre-CSLR levy funded by the 10 largest financial institutions – and fall to registered financial advisers.