“It is for these reasons that CPA Australia supports the government’s intent to establish a compensation scheme of last resort, which will help fulfil this objective while also supporting confidence in the financial sector’s dispute resolution framework.

“While the government has introduced the Financial Sector Reform (Hayne Royal Commission Response No. 3) Bill 2021 to establish a CSLR, we are concerned that the scheme proposed in the bill has significant shortcomings, including its narrow scope, appears to provide inadequate coverage to consumers and does not look to address the underlying causes of unpaid determinations.”

Further, Dr Pflugrath outlined that CPA Australia also believes that all financial product providers and advisers, “not just those in the retail financial advice sector”, have a shared responsibility to lift the confidence and trust in the sector.

“We are concerned that while the federal government has made a commitment to reducing red tape to cut the cost of doing business, the proposed scheme will arguably add significant cost and complexity, which seems to be at odds with this commitment,” he said.

“The financial planning sector has undergone significant structural changes since the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. With the exit of many large institutions, including the big four banks, many financial advisers are now sole traders or small businesses who simply cannot afford the continuing rising costs associated with increased complex regulation.

“The proposed scheme therefore risks making financial advice less affordable and accessible in an environment where the impacts of COVID and Australia’s ageing population mean that the need for advice continues to grow.”