Shadow Minister for Financial Services, Pat Conaghan, has used a major address at the FAAA National Conference in Perth to warn the Compensation Scheme of Last Resort (CSLR) has become a disaster - failing to protect victims while costs spiral out of control.
Speaking to a packed crowd of financial advisers at the Perth Convention and Exhibition Centre, the Shadow Minister began by highlighting the financial advice industry has been unfairly painted with the same brush as those involved with the alleged failures of First Guardian and Shield.
"I was genuinely shocked to see Senator O'Neil demonising financial advisers during a recent Senate inquiry - not just the alleged bad actors that were involved in situations like First Guardian and Shield - but the entire profession," Mr Conaghan stated.
"She was painting people in this room with the same brush as those involved in First Guardian. Many of you would have saved your clients by warning them not to invest in funds like these. Rather than condemning an entire profession, we should be working together to raise standards and protect consumers.
"Australians need affordable advice from professional advisers more than ever. We're not going to get that if we keep adding new layers of misguided red tape."
Mr Conaghan then moved into a sharp critique of the CSLR in its current form.
"The CSLR is fundamentally broken. With an estimated $126.9 million levy for 2027 - and that's without the blowout that will come as First Guardian and Shield start to be added - the CSLR is a growing disaster.
"It was designed to provide peace of mind for those that get advice - and to be a true scheme of last resort. But it's constantly running out of money for victims, hasn't done anything to stop financial collapses, and too often seems like the first resort," Mr Conaghan continued.
"This isn't the fault of the CSLR operator. They work with the system they've been given. But hard work needs to be done by the government and done fast. It's a big problem that keeps getting bigger under Labor… and advisers can't take on more of the costs. [Advisers] certainly shouldn't bear all the blame when much of the problem has nothing to do with your industry."
"Take First Guardian: Sure, there were some bad advisers involved, no one denies that. But there were many more links in the chain - ratings agencies, super platforms, cold-callers, and unlicensed spruikers - who all need to answer for their part."
Mr Conaghan reserved his strongest criticism for ASIC. He acknowledged while they were doing good work now to recover money and pursue those responsible, they could have prevented this.
"The biggest link in the chain that failed was ASIC. ASIC was too slow. They received warnings about First Guardian back in 2019 - years before most investors had put in any money. When they realised there was a problem, they warned some super trustees but not others.
"ASIC need to own up to their own failings."
Mt Conaghan said Labor's focus appears to be new laws, but he's not convinced more laws are needed.
"We already got a truckload of new laws after the Royal Commission, but what did they deliver? All those laws didn't protect investors in First Guardian, Shield, and Lion Property Group.
"ASIC has the tools. What they lack is direction. It's become too big and too confused about its focus. They're trying to be both a cop and a regulator, and it's not doing either role well.
"Australians deserve a regulator that properly protects their super."
