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Synchron against advisers funding planned compensation scheme

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Synchron says the advice sector should not have to pay a “single dollar” to fund the proposed Compensation Scheme of Last Resort.

Treasury closed consultation in August on the planned scheme, a recommendation made by the Hayne royal commission into financial services misconduct.

Synchron Director Don Trapnell says only 1.4% of disputes lodged in the last financial year with the Australian Financial Complaints Authority (AFCA) involved the advice sector.

“Of those, only 0.03% were not settled, and yet the advice sector is expected to fund the lion’s share of the [scheme],” he said. “It beggars belief.”

He says Treasury’s consultation paper shows the financial advice sector will be required to pay more than 76% of the estimated levies for the scheme.

An urgent rethink of the way the scheme is funded is necessary, Mr Trapnell said.

“The Government must stop making scapegoats out of the advice community, which is clearly not responsible for product failures and not responsible for the vast majority of AFCA complaints,” he said.

Adviser peak bodies including the Financial Planning Association (FPA)and Association of Financial Advisers (AFA) have previously voiced reservations about the design of the scheme.

Last month FPA and AFA joined forces with consumer advocates to push for a “stronger” scheme, saying the planned model as set out in the Treasury consultation fails to cover every financial offering.

They say in a joint statement the proposed legislation for the scheme should be expanded to provide monetary redress for all products and services that fall under the jurisdiction of AFCA.

The statement says the draft bill will exclude vast segments of the financial industry, including managed investment schemes and the funeral expenses industry, leaving many victims of financial misconduct without redress.

It will also mean that a number of large financial institutions including product providers are not required to contribute to the costs of compensation.