The SMSF Association is “deeply concerned” about the exclusion of managed investment schemes from the compensation scheme of last resort.
Appearing before the Senate Economics Committee, the association said the exclusion was a particular worry for self-managed superannuation fund (SMSF) investors and it would fall to the advice industry to pick up the costs.
Peter Burgess, deputy chief executive, said: “The SMSF sector is deeply concerned that the scheme does not adequately incorporate all market participants, particularly the exclusion of managed investment schemes.
“Over the years, investors have suffered substantial financial losses because of misconduct and subsequent insolvency of managed investment schemes such as Trio.”
Burgess said the failure to broaden the sector could result in advisers being left to pay “disproportionate” costs as the fault would be placed with them.
He said: “For unadvised SMSF investors, if managed investment schemes are not included in the scheme, they won’t have access to a compensation scheme like this. So that is a concern. For those that are advised, it could be the advice sector is called upon to pay a disproportionate cost of the compensation, given the spotlight will be on advisers in terms of allocation of fault.
“We are concerned that without broadening of the funding base to include other sectors like managed investment schemes that the financial advice sector may incur a disproportionate share of the compensation cost at a time when there’s a real focus on the cost advisers are incurring.”
There could then be the indirect cost of advice costs increasing for consumers as a result of advisers being forced to fund the scheme.
“We think broadening the scheme would be a fairer way of sharing the costs,” he concluded.