ASIC stated that this is a necessary step for clients to preserve their possible eligibility under a potential future CSLR, ASIC said.

However, the CSLR has not yet been established. In addition, the draft version of this scheme has a very limited scope.

FPA chief executive said it demonstrates the need for the CSLR to be urgently established.

Ms Abood noted that the drafting of the scheme undertaken by the previous government, which lapsed in April this year, would not have covered managed investment schemes.

“This would leave financial planners to foot most of the bill for a scheme that would have left the majority of affected consumers unprotected. For example, most of the victims of the Sterling Group collapse would not be covered under the draft scheme,” she said.

“At present there is $3.7 million in unpaid AFCA determinations relating to financial advice due to insolvency. Yet MIS operators have $6.4 million outstanding against them — almost double this amount. The total unpaid determinations are $14.7 million across all the areas AFCA manages.”

The FPA said this makes it clear that the CSLR must extend across AFCA’s remit to achieve its aims of ensuring that victims of financial misconduct can be compensated where the firm involved has become insolvent.

“It’s also critical that the scheme be funded equitably, so that the current smaller number of financial planners, many of whom are small business operators, are not left bearing the full costs,” said Ms Abood.

 “While it was in Opposition, Labor suggested amendments which would include MISs in the scheme, and we look forward to seeing these changes implemented now they are in government.”