The Financial Planning Association (FPA) and seven other peak bodies have issued a joint statement opposing the proposed design of the compensation scheme of last resort.

The eight peak bodies say the planned setup as outlined by Treasury in an exposure draft legislation proposal paper “may be [the] last straw” for financial advisers, who are grappling to address the many challenges facing them such as rising compliance costs and increased regulatory requirements.

The design of the scheme as flagged in the Treasury paper will make financial advice less affordable and accessible, the joint statement says. The scheme is a recommendation from the Hayne royal commission.

“All eight associations support a truly last resort compensation scheme,” the joint statement says.

“However, the associations do not support the way the scheme is structured to include Australian Financial Complaints Authority’s (AFCA) outstanding expenses in addition to failing to address the causes of unpaid consumer compensation.

“The associations are concerned the scheme may not be used purely as a last resort. This is a major and unwarranted departure from the royal commission’s intent.”

The other seven associations that signed the joint statement are the Association of Financial Advisers, CPA Australia, Chartered Accountants Australia & New Zealand, the Institute of Public Accountants, SMSF Association, Stockbrokers and the Financial Advisers Association and Boutique Financial Planners.

The peak bodies say the draft legislation establishes a compensation scheme operator as a subsidiary of AFCA.

This adds unnecessary red tape by requiring the Australian Securities and Investments Commission (ASIC) to administer invoices and payments and significantly increases the government administration costs of the financial advice sector with little benefit to consumers.

ASIC fees for financial advisers have increased by more than 230% over the past three years, with many unable to afford the rising costs as they are sole traders or small practices.

“Others are authorised representatives of groups who participate in other compensation schemes, which adds duplication,” the joint statement said.

“The Federal Government made a commitment to reducing red tape to cut the cost of doing business.

“The proposed scheme will add significant cost and complexity, which is at odds with this commitment.”

The peak bodies say they have made individual submissions to the public consultation which oppose the draft legislation.

Consultation for the draft legislation closed on Friday.

Click here for the paper.