CSLR OUTRAGE – TIMING PERFECTION
IF YOU ALWAYS DO WHAT YOU HAVE ALWAYS DONE,
YOU WILL ALWAYS GET WHAT YOU HAVE ALWAYS GOT.
AN OVERVIEW.
The ITS TIME theme of our recent Canberra Conference for the Advice community to make an aggressive stand has arrived, the CSLR abomination is the catalyst to finally galvanise the Advice Profession.
The current acrimonious mood within the Advice Community over the CSLR is like no other issue in living memory. The anger is palpable, but we must however funnel this outrage into specific strategies that will make a meaningful difference to the plight of our Profession, our businesses and consumers. The timing could not be more perfect with the positioning of the political cycle and proximity to the Election.
It is also time we identified the real antagonists of our Profession over the decades to understand who has been working behind the scenes in Canberra to convince Politicians and Bureaucrats to put in place such malignant Legislation that is slowly destroying our Profession. It is critical to understand who are our friends and arguably more important who are our enemies in Canberra.
Perversely, the Advice community should [but we won’t] congratulate the Financial Services Council [FSC] for their success over the past 11 years with lobbying Canberra to legislate LIF, FASEA, Grandfathered Revenue ban, unnecessary compliance and now the CSLR successful manipulation.
FSC are by far the most successful Association lobbyist in financial services history originally operating under the Investment and Financial Services Association [IFSA] brand until 2010 and funded by the Financial Institutions. They are highly successful but unfortunately, a formidable enemy of consumers and the Advice community. The Advice community must be continually vigilant of any involvement the FSC has with Advice issues.
The FSC’s latest and greatest success for their Financial Institutional members has been moving the focus of CSLR away from Comm Hayne’s recommended structure to what we have today – legislation that is totally focussed on penalising the Advice community for other stakeholder’s incompetence. It exonerates Institutional poor product management and ASIC for allowing flawed PDS’s onto the market. Considering there has been around $40 billion of failed or impaired MIS’s since 2008, the FSC have done a magnificent job for the Financial Institutions to avoid accountability. Equally, they have unfortunately done a great job of shifting the cost onto the Advice community and ultimately consumers.
We suspect the only AFCA unpaid customers are from those failed Financial Advisers who are caught with product failure. Financial Advisers are yet again the political scapegoat whilst the perpetrators escape accountability.
How can Politicians and Canberra Bureaucrats accept that Financial Institutions cannot be held responsible for the performance of their own products? Is it stupidity, naivety or corruption?
Paul Keating famously once said ‘just follow the money trail’ when trying to analyse human motivations. It should come as no surprise that the Financial Institutions were funding the FPA/AFA/FSC during their cooperation with then Minister Kelly O’Dywer in 2015 to give us LIF/FASEA etc. Why are we raising these historical factual events? If the Advice community does not understand what has happened in the past, we will continue to make the same mistakes going forward.
It should be noted that the Liberals have acknowledged that they did not get it right with the Advice Profession during 2014 – 22 period but are determined to correct it, we welcome this admission.
THE WINDOW OF OPPORTUNITY
We have a 2 – month window of opportunity to address CSLR’s outrageous ramifications if we are prepared to act with belligerence, combativeness and at times militancy to protect consumers, our businesses and our livelihoods.
Ambivalently sitting back and doing nothing about this issue is not an option, it has the potential to widely destroy businesses and adversely affect consumers. Although we do not have the political and monetary capital of the FSC, what we do have is over 2 million clients who vote in federal elections, there is nothing more powerful with the political parties at this stage of the political cycle. It is time to use our collective political might to threaten the Canberra bubble and its inhabitants.
THE CURRENT POLITICAL PLAY – CONFLICTS AND DISREPECT
You may recall the Morrison Government tried to deflect their accountability over the LIF/FASEA/Grandfathered Revenue leading into the 2022 Election by announcing the QAR Review in an attempt to ‘kick the can down the road’. The Albanese Government are trying to pull off the same stunt to limit political damage leading into the 2025 election by initially shocking us with the next CSLR Levy quantum and then announcing a ‘review’ that will take at least 6 months to also ‘kick the can down the road’ post – election to avoid accountability.
It is imperative to keep the CSLR issue live leading into the election to have any hope of amending the Legislation, we cannot allow the FSC to represent Adviser issues at any point considering they are the architects of the CSLR Legislative changes. It is almost comical that the FSC recently supported the notion that CSLR was unfair and agreed with Treasury reviewing the legislation….such sanctimonious behaviour.
The Minister suggesting Treasury Bureaucrats will review CSLR is incongruent nonsense. Considering Minister Jones’ office is full of Treasury bureaucrats who originally structured and approved the CSLR/Dixon outcome and Treasury/ASIC Bureaucrats are the victims of the Dixon losses, it is profoundly conflicted and an insult to our intelligence having Treasury review CSLR, it’s akin to appointing Dracula to assess the blood bank.
Now is the time to use an independent third party to conduct the review if one is needed, which we believe is unnecessary. The legislation should reflect exactly what the Ramsay Report and Comm Hayne wanted from the outset, Product manufacturers are held accountable for failed products and Advisers for poor advice outcomes, it is that simple.
Attached is a document Frydenberg released leading into the 2019 election where he pledged the Morrison Government would implement all Commissioner Hayne’s Royal Commission recommendations where CSLR was meant to commence on 1/1/2008 and cover all Managed Investment Schemes [see page 36]. Both sides of Politics agreed to implement CSLR in its recommended form which was of course not achieved, the Institutions were never going to let that happen. Read more ….
Enter the FSC representing the Financial Institutions who restructured the legislation away from Financial Institutions becoming accountable for poor management of their own failed products and ASIC for ‘registering’ them, essentially shifting the blame and accountability onto the Advice community and their consumer clients. It was a master stroke of evil political and legislative manipulation BUT it can be countered with desperate Political parties wanting votes and a very close Election outcome expected by May.
WHAT FINANCIAL ADVISERS NEED TO DO.
We see a 3 – step process commencing immediately. The Advice community’s powerful competitive advantage is its 2 million clients who will ultimately pay for this outrage via higher advice costs, a powerful political motivator to act in their own self – interest.
- AIOFP action – We have been in constant contact with both the Ministers and Shadows Advisers over this issue since our November Canberra conference. We specifically want the legislation changed to keep the product manufacturer community accountable for the failure of their own products and losses for consumers. As Hayne intended, Financial Advisers are only responsible for poor Advice outcomes for consumers. We also want the Dixon liability removed. It defies the non – retrospective intention of the legislation and it’s a financial product issue, not advice. The first party to agree with our demands will get preferential treatment and consideration from the Advice community and their clients at the upcoming election.
- Adviser Action – Every Financial Adviser should be immediately communicating with their clients about the unfairness of the CSLR and what it is going to cost them to remain a client. We need to engage and enrage consumers with the unfairness of this legislation.
- Consumer action – once a decision is made on which political party will cooperate, consumers will be asked to email their local sitting member about their decision to either support or oppose them. Suggesting the client to put the least preferred party last on the ballot is a politically effective strategy to intimidate. This action will be exceptionally powerful going forward, future Politicians will be wary to infuriate our Profession.
SUMMARY
The Advice community is requesting that both sides of politics honour their bipartisan pledge in 2019 to implement the CSLR in its Commissioner Hayne recommended form. Is that too much to ask? Instead of a fair outcome of Advisers paying for deficient Advice outcomes and Institutions paying for their poor management of products, the FSC manipulated the Legislation to dump all liabilities onto Financial Advisers and consumers.
The Advice community must act with haste, the election is up to 3 months away and we must use our considerable political muscle as a collective to achieve our objective. For many practices, waiting another 3 years for the ideal phase of the political cycle again may be terminal for their business.
We have recently requested an update from the National Anti – Corruption Commission [NACC] with our CSLR/DIXON complaint made 7 months ago to assess whether this has contributed to the Minister’s sudden retirement.
The AIOFP has been active over the past 12 months with its lobbying objectives and will continue until Election Day, we will be shortly requesting financial assistance from our members to assist our activities.
Peter Johnston | Executive Director
