Outgoing Minister for Financial Services Stephen Jones has given strong hints the notorious ‘but for’ provision in the Compensation Scheme of Last Resort will be addressed in the review of the scheme.
Addressing the Professional Planner Advice Policy Summit on Monday, Jones said the intention for the CSLR was for it to be sustainable and was unconvinced the scheme was “in its final and stable form”.
In figures released at the end of January, the CSLR’s actuarial services provider Finity Consulting released an initial levy estimate of $70.11 million for financial advice profession for FY26, significantly eclipsing the $20 million subsector cap. In response, Treasury was instructed to launch an immediate review of the scheme.
Jones emphasised to the summit the scheme was “not about guaranteeing investment returns”, alluding the controversial ‘but for’ provision that has mustered industry pushback which can offer compensation to victims who have not received a capital loss.
“It’s about ensuring that genuine victims have access to some redress,” Jones said.
“[The CSLR] is an important part of the financial system for advisers, because it gives Australians confidence that there is a backstop in situations of genuine last resort.”
Much of the industry has criticised the CSLR for being unsustainable which has been revealed due to the heavy costs placed on it by the problems of Dixon Advisory and United Global Capital.
But Jones also conceded there wouldn’t be an easy fix to help the scheme succeed.
“It’s no good for consumers if the scheme falls over,” Jones said.
“Some people want a quick fix and I wish there was one, unfortunately two of the biggest cases to hit the CSLR – the Dixon and United Global Capital – have very different characteristics that make a quick fix very difficult.”
Backing the scheme despite struggles
Despite concerns surrounding the substantial levy, Jones expressed support for the CSLR and its implementation, noting the initial legislation was proposed by the previous government after the conclusion of the Hayne royal commission, before Jones took over as Minister.
“We welcomed the bipartisan support for its design given it’s the same scheme that was introduced into parliament by the previous government,” Jones said.
Due to the subsector levy blowout, the next minister will be required to ask the scheme to slow down compensation payments, to pay the levy in instalments, or levy other subsectors.
Jones, who will retire before the next election, won’t be in office to make the call on how to handle the levy excess and was unwilling to weigh on the most suitable option.
“I don’t intend to launch a review and then pre-empt the [Treasury] review, so we’ll keep that running and ensure that we get to the right outcome,” Jones said.
David Berry, CEO of the CSLR, will address the summit on Tuesday morning.
Doubling down
Asked about the struggle to gain a consensus view in the industry to drive policy decision forward, particularly with the Delivering Better Financial Outcomes reforms, Jones said his fall back would be what was in the public’s interest.
“The consensus I would describe as guided consensus, guided by the public interest,” Jones said.
When questioned about the Quality of Advice Review and the consequent DBFO reforms, Jones said the QAR created a framework and direction, but not draft legislation.
“We’ve adopted the general thrust of that we’ve consulted deeply with industries and with participants to ensure that we’ve got it right,” Jones said.
The DBFO reforms are still in the process of implementation and Jones said he remains committed to the proposals outlined as long as he is minister.
“We’re committed to modernising the Best Interest Duty and reforming Statements of Advice, just as we’re committed to introducing a new class of adviser that any financial firm can employ to give safe advice,” Jones said.
When the new class of adviser was brought up in the discussion, Jones asked the audience for ideas of what these advisers should be named, if not the current name.
“Do you want to do a competition while you’ve got people here [about] a better name for the new class of adviser? [I Can] only make the same mistake once,” Jones said, alluding to criticism of his original “qualified adviser” moniker that drew significant industry criticism.
