Australia’s Compensation Scheme of Last Resort has “perturbed” a pair of representatives from New Zealand’s advice market.
Simon Manning and Mark Nalder from financial advice provider (FAP) Wealthpoint – the NZ equivalent of a licensee – attended the Professional Planner Licensee Summit last month. Reflecting on the event, Wealthpoint chief executive Manning said he was surprised to learn of the existence of the controversial scheme.
“We were pretty perturbed by the compensation scheme,” Manning told Professional Planner.
“We don’t have that here. We did the numbers and listened to some of the numbers around the levy cost per adviser, and that would be a really big deal over here for us as well. We can certainly feel the pain in the room.”
The CSLR has gained notoriety in Australia’s financial advice sector due to heavy weight of the annual levy.
The CSLR covers four subsectors including financial advice, which has been the only subsector to exceed the $20 million levy cap and has resulted in new Minister for Financial Services Daniel Mulino being informed of the need for a special levy to cover a $47 million shortfall in compensation due in FY26.
CSLR chief executive David Berry had told the summit on the morning of day two how it looks to overseas jurisdictions, particularly the UK which has the Financial Services Compensation Scheme, for benchmarking.
“Every jurisdiction is slightly different, but we most closely align with the UK where they’ve got the FSCS,” Berry said.
“The FSCS is a broader scheme, it has AFCA responsibilities as well as the compensation payment, so we work closely with them to understand.”
Berry said the CSLR’s philosophy was to avoid learning things “for the first time that we don’t have to”, instead wanting to lean of tried and tested experiences from other markets.
“We’ve been using their knowledge and their experience to help us shape what we do. That said we’re bound by the limitations of the legislation,” Berry said.
“There is a level of benchmark and there is a level of communication with those international schemes.”
But the CSLR was only one of many takeaways for Manning and Wealthpoint head of strategy and growth Nalder, who have been on a fact-finding mission since last year to help develop the firm’s five-year plan.
Nalder said he and Manning have been visiting local licensees, as well as attending the Licensee Summit, to see what could be applicable to their strategy planning.
Manning said the New Zealand market has some significant differences to the Australian market but also has some similarities, such as the Australian licensee structure.
“We felt we had a lot in common with the licensees which is one of the reasons we visited last year and that really confirmed that a lot of our set up and structure and challenges were the same,” Manning said.
Wealthpoint has 160 advisers. “We’re not tiny; we’ve got decent scale here,” Manning said.
Manning said the group is planning to raise capital, again looking for guidance from the Australian market which has seen several high-profile M&A deals in the past few years, including the Entireti/AZ NGA/AMP deal that was featured on the first day of the summit.
“We’re quite aware that is probably a few years ahead of the market [in NZ], although we are seeing some moves here, including by some of the known names from Australia,” Manning said.
“Looking through the summit, that really reinforced to us how similar – everything is subtly different – but the challenges are all very similar. We’re at a similar state for things like AI, so is the world.”
Manning said New Zealand is “decades behind” in superannuation savings compared to Australia.
“We have got an industry that is starting to mature there with our KiwiSaver which is a much more simple version of the Australian system and it is starting to get to the point where it is viable for an adviser to make a business out of,” he said.
“That hasn’t really been true until recently. The Australian market is so much bigger and more mature, there’s a lot of learnings there for us.”
Unfortunately, this levy is completely misplaced and won’t solve anything. ASIC is the regulator responsible for overseeing both the advice sector and the managed funds sector. It is ASIC who has failed in their mission not the thousands of great advisers doing their best for clients every day of the week. Unfortunately. Understandably, ASIC won’t put the blame on itself so advisers become the scapegoat.