Are there enough advisers to fund CSLR?
As well as the sustainability of the compensation scheme of last resort (CSLR), the Government needs to consider the sustainability of its funding source – the financial advice market.
Appearing before the Senate Economics Legislation Committee, CPA Australia financial planning policy adviser, Keddie Waller, discussed the funding and sustainability of the CSLR.
In 2021 proposals, it was indicated financial advisers would face more than three-quarters of the cost of the scheme including establishment costs, capital reserve establishment and annual administration costs.
Annual administration costs were expected to be $3.7 million yet there were only expected to be 20 to 25 unpaid determinations each year, which indicated the cost of each one would be around $150,000.
Waller said this could be problematic as the financial advice industry was in decline, leaving fewer advisers to split the cost between.
She said: “We need to consider the sustainability of the scheme and the sectors that are funding this game.
“The large proportion of those left in financial services advice sector are small business owners and they have faced considerable changes and regulatory costs over the last couple of years and we are looking at further costs with this scheme.
“We need to consider the sustainability of that sector in an environment where we are seeing a considerable drop in numbers with less than 18,000 advisers in financial planning, we have had less than 100 new entrants to the sector. So, if we want to look at the sustainability of the scheme, we also need to look at those who are going to be funding it.”
According to figures from Wealth Data, the number of advisers stood at 17,621 last week and were expected to decline to between 15,000 to 16,000 during 2022.
AUTHOR
Laura Dew
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