The adoption of a new last resort compensation scheme will not change the underlying problem of product failures within Australia’s financial services sector, but will exacerbate it further, a former ASIC compliance officer has said.
“The new industry levee will only be paying to prop up those very badly managed and very risky companies to operate and flourish even further under a last resort scheme,” former ASIC senior officer Bruce Keenan said.
In a submission to the government’s compensation review, Keenan said the government must be mindful of not being seen to be singling out the financial planning industry as the sole cause for investor losses.
“Government must also consider the consequence of a new ‘levee’ solely on the financial planning industry as it will cause financial hardship and job losses, and have other serious unintended consequences,” he said.
Keenan, who is now employed by two unnamed licensees as a compliance manager, said suggestions only financial planners should be subject to a compensation levy were unfair.
He said while the government’s St John’s report published figures from the Financial Ombudsman Services (FOS), at least two of the annual reports for FOS’s predecessor, the Financial Industry Complaints Service (FICS), found that during 2007 and 2008, 90 per cent and 92 per cent of financial licensees had no complaints against them.
“This suggests that 10 per cent or less of financial planning licensees are involved in claims for these two years through the recognised EDR (external dispute resolution) scheme,” he said.
He said that from 2002 to 2009, 8.2 per cent of all phone calls to FICS/FOS related to complaints against ‘financial planners’.
Statistics from ASIC annual reports for the years 2006, 2007 and 2008 showed only 20 per cent of consumer complaints against financial planners progressed to “further investigation”, he said.
He said the government had a “legal and moral” responsibility to both consumers and the wider industry under the law for any proposed compensation scheme to be fair and equitable to all.
