1 00:00:05,880 --> 00:00:08,640 Speaker 1: Welcome to the Fear and Greek Business Interview. I'm Suan Alma. 2 00:00:08,960 --> 00:00:12,720 Speaker 1: This month, four parties who'd been the victims of financial 3 00:00:12,800 --> 00:00:16,880 Speaker 1: services misconduct received payments totally more than three hundred and 4 00:00:16,920 --> 00:00:21,200 Speaker 1: sixty thousand dollars. These payments marked a major milestone in Australia. 5 00:00:21,280 --> 00:00:25,360 Speaker 1: They're the first made by the Compensation Scheme of Last Resort. 6 00:00:25,840 --> 00:00:29,040 Speaker 1: The CSLR was created on the advice of the MS 7 00:00:29,200 --> 00:00:32,080 Speaker 1: Review as well as the Banking Royal Commission. It's designed 8 00:00:32,080 --> 00:00:34,519 Speaker 1: to be a safety net, able to provide payments of 9 00:00:34,560 --> 00:00:36,960 Speaker 1: up to one hundred and fifty thousand dollars to people 10 00:00:37,000 --> 00:00:40,080 Speaker 1: harmoned by the actions of financial institutions, typically where the 11 00:00:40,080 --> 00:00:43,920 Speaker 1: firm involved has later become insolvent. David Berry is the 12 00:00:44,040 --> 00:00:47,320 Speaker 1: chief executive of the Compensation Scheme of Last Resort. David, 13 00:00:47,360 --> 00:00:48,320 Speaker 1: welcome to Fear and Greed. 14 00:00:48,760 --> 00:00:49,080 Speaker 2: Thank you. 15 00:00:49,120 --> 00:00:50,280 Speaker 3: Sure we'll get. 16 00:00:50,120 --> 00:00:52,760 Speaker 1: Into the details of the CSLR in a moment. But 17 00:00:52,760 --> 00:00:54,800 Speaker 1: what about those four claimants. That's a lot of money 18 00:00:54,840 --> 00:00:58,080 Speaker 1: to pay out. What were the circumstances leading to their payouts? 19 00:00:59,280 --> 00:01:01,920 Speaker 3: It was a of things. So as a Compensation Scheme 20 00:01:01,960 --> 00:01:04,720 Speaker 3: of the Last Resort we cover four key areas. So 21 00:01:05,200 --> 00:01:08,920 Speaker 3: financial advice, credit into mediation or mortgage broking on finance 22 00:01:08,959 --> 00:01:14,000 Speaker 3: broking lending as well as the stockbroking segment. And the 23 00:01:14,040 --> 00:01:16,160 Speaker 3: majority of claims which we are seeing coming through are 24 00:01:16,200 --> 00:01:20,600 Speaker 3: in that financial advice space, but they range from just 25 00:01:20,680 --> 00:01:26,160 Speaker 3: poor advice. The cases involve experiences where people have not 26 00:01:26,280 --> 00:01:29,800 Speaker 3: understood the risks and the advisors have certainly not made 27 00:01:29,800 --> 00:01:33,160 Speaker 3: that clear and in some cases have been operating in 28 00:01:33,200 --> 00:01:36,000 Speaker 3: their own best interest as opposed to the people they're advising. 29 00:01:36,360 --> 00:01:39,039 Speaker 1: Okay, so it covers a range of areas, but it 30 00:01:39,120 --> 00:01:43,120 Speaker 1: is financial advice at the moment where the misconduct, for 31 00:01:43,160 --> 00:01:45,959 Speaker 1: one of a better term has been proven thus far. 32 00:01:46,120 --> 00:01:46,600 Speaker 1: Is that right? 33 00:01:47,360 --> 00:01:49,840 Speaker 3: That's correct. That's correct. And as the name of the 34 00:01:49,920 --> 00:01:53,600 Speaker 3: organization suggests, we are the last resort, so there's a 35 00:01:53,640 --> 00:01:56,360 Speaker 3: lot of things that go on before we see it 36 00:01:56,400 --> 00:01:58,960 Speaker 3: and before we get to make the claim. So any 37 00:01:59,000 --> 00:02:01,000 Speaker 3: claim that's been made to they've been on the go 38 00:02:01,120 --> 00:02:05,440 Speaker 3: for a long time and they've had to explain their 39 00:02:05,480 --> 00:02:09,280 Speaker 3: situation to the external Lumbitsman or the AFCA Austrain Financial 40 00:02:09,320 --> 00:02:14,119 Speaker 3: Complaints Association. The Edmundsman has had to confirm that yes, 41 00:02:14,160 --> 00:02:17,560 Speaker 3: it was financial misconduct on the part of the advisor 42 00:02:18,240 --> 00:02:22,720 Speaker 3: and then awarded compensation from that. They then initiate contact 43 00:02:22,760 --> 00:02:26,399 Speaker 3: with the member organization which is responsible for the advisor, 44 00:02:26,600 --> 00:02:30,000 Speaker 3: asking them to pay the compensation and go through a 45 00:02:30,080 --> 00:02:33,280 Speaker 3: process of trying to get the funds to the individual 46 00:02:33,960 --> 00:02:36,120 Speaker 3: after a period of time. If they've been unable to 47 00:02:36,160 --> 00:02:38,800 Speaker 3: do that, AFCA don't have the powers to compel the 48 00:02:38,880 --> 00:02:43,120 Speaker 3: organization to pay. And so that's where the compensation scheme 49 00:02:43,160 --> 00:02:45,320 Speaker 3: of last resort comes in. Where will come in? What 50 00:02:45,400 --> 00:02:48,200 Speaker 3: WI assess the eligibility of the claim and we will 51 00:02:48,440 --> 00:02:52,440 Speaker 3: effectively step in for the organization that hasn't paid the compensation. 52 00:02:52,639 --> 00:02:56,160 Speaker 1: And generally that organization has become insolvent. Is that why 53 00:02:56,240 --> 00:02:58,120 Speaker 1: you can't actually get money from them? 54 00:02:58,600 --> 00:03:01,160 Speaker 3: Yes, the majority of them are. They're either an administration 55 00:03:01,480 --> 00:03:04,360 Speaker 3: or liquidation. We have had a couple that have just 56 00:03:04,440 --> 00:03:08,560 Speaker 3: refused to pay. However, the powers that legislation allows us 57 00:03:08,680 --> 00:03:12,480 Speaker 3: to use, there's some pretty significant consequences of not paying, 58 00:03:12,560 --> 00:03:15,320 Speaker 3: so we can compel the organization to pay. 59 00:03:15,760 --> 00:03:17,920 Speaker 1: Okay, So how are you funded? Where does the money 60 00:03:17,960 --> 00:03:19,480 Speaker 1: actually come from? 61 00:03:20,200 --> 00:03:23,600 Speaker 3: So we're funded through levees on industry. The industry is 62 00:03:23,639 --> 00:03:27,079 Speaker 3: there to support the scheme. The amount and size of 63 00:03:27,120 --> 00:03:29,120 Speaker 3: the levee is based on what we see is the 64 00:03:29,320 --> 00:03:32,640 Speaker 3: coming amount of compensation payments and the cost to operate 65 00:03:32,680 --> 00:03:36,080 Speaker 3: the scheme, and it is broken down to each of 66 00:03:36,120 --> 00:03:40,040 Speaker 3: the four segments that we look after, and it's based 67 00:03:40,080 --> 00:03:44,000 Speaker 3: on a user pays effectively. So if one particular segment 68 00:03:44,120 --> 00:03:47,120 Speaker 3: is dominating most of the claims, that segment will pay 69 00:03:47,160 --> 00:03:48,640 Speaker 3: the majority of the levee. 70 00:03:49,360 --> 00:03:52,680 Speaker 1: Okay, maybe we'll just take a list to some audio here, 71 00:03:53,240 --> 00:03:56,760 Speaker 1: which is a phone call between one of your staff 72 00:03:56,800 --> 00:04:00,880 Speaker 1: members and a person who is applying, who is claiming 73 00:04:00,960 --> 00:04:04,240 Speaker 1: for money. Maybe that's all I need to say. Let's 74 00:04:04,320 --> 00:04:04,840 Speaker 1: just play that. 75 00:04:07,480 --> 00:04:12,120 Speaker 2: Hello, this is and a calling from the compensation scheme 76 00:04:12,160 --> 00:04:15,800 Speaker 2: of last resort? Am I thinking with Maria? Ohana, I've 77 00:04:15,840 --> 00:04:20,720 Speaker 2: been thinking about you. Is now a good that at 78 00:04:20,800 --> 00:04:28,080 Speaker 2: the time to speak? Yes, definitely wonderful. So just before 79 00:04:28,080 --> 00:04:29,560 Speaker 2: I jump in, I need to let you know that 80 00:04:29,600 --> 00:04:34,080 Speaker 2: this call is recorded for training and quality purposes. I'm 81 00:04:34,120 --> 00:04:38,279 Speaker 2: actually calling with good news today, Maria. We've considered your 82 00:04:38,640 --> 00:04:42,280 Speaker 2: claim and we've found that it is eligible for compensations. 83 00:04:46,600 --> 00:04:49,640 Speaker 2: So the total of that we are able to offer 84 00:04:49,680 --> 00:04:58,640 Speaker 2: you is fifty four thousand and fifty dollars. 85 00:04:59,200 --> 00:05:08,600 Speaker 4: Oh Oh my god, I'm worried and I'm going to 86 00:05:08,720 --> 00:05:12,120 Speaker 4: miss the house because of my hares and workers. 87 00:05:12,320 --> 00:05:17,360 Speaker 2: I know, I know, it must have been an unbelievable 88 00:05:17,400 --> 00:05:19,599 Speaker 2: amount of stress and you have to go through that. 89 00:05:22,200 --> 00:05:25,000 Speaker 5: I couldn't even the girls with me and stuff that 90 00:05:25,120 --> 00:05:26,680 Speaker 5: I would have left from my kids. 91 00:05:26,800 --> 00:05:31,520 Speaker 4: That's my afternoon. 92 00:05:32,279 --> 00:05:45,479 Speaker 5: Like forty, I wasn't because he's crying. 93 00:05:47,920 --> 00:05:50,480 Speaker 2: Oh my godness, it's from the middle. You take your time. 94 00:05:52,960 --> 00:05:57,719 Speaker 4: Oh my god, my god, my god, he's broken. 95 00:05:57,839 --> 00:06:00,680 Speaker 1: I put an even six David. I love about that, 96 00:06:00,720 --> 00:06:03,719 Speaker 1: particularly audio. It's not just it's not just the woman 97 00:06:04,240 --> 00:06:07,000 Speaker 1: receiving the money. He's emotional. He was actually the person 98 00:06:07,080 --> 00:06:09,279 Speaker 1: making the phone calls. She was almost as emotional as well. 99 00:06:09,279 --> 00:06:12,120 Speaker 1: Maybe not quite, but she was certainly affected by the 100 00:06:12,200 --> 00:06:15,599 Speaker 1: fact that what the compensation scheme was doing was making 101 00:06:15,640 --> 00:06:18,839 Speaker 1: such a big difference to the person receiving the money. 102 00:06:19,440 --> 00:06:21,479 Speaker 3: It certainly hit home. I think a lot of the 103 00:06:21,480 --> 00:06:23,279 Speaker 3: times we do a job knowing that we're doing the 104 00:06:23,320 --> 00:06:26,440 Speaker 3: right thing and we're helping people, But when you experience 105 00:06:26,480 --> 00:06:31,440 Speaker 3: firsthand the impact that assisting somebody who has gone through 106 00:06:31,480 --> 00:06:35,360 Speaker 3: a lot, and with that particular client, they had had 107 00:06:35,400 --> 00:06:39,440 Speaker 3: some really bad experiences. What we see at the Compensation 108 00:06:39,560 --> 00:06:42,640 Speaker 3: Scheme of Last Resort is everything that hasn't been able 109 00:06:42,680 --> 00:06:46,200 Speaker 3: to be resolved. So you imagine all of the prickles 110 00:06:46,320 --> 00:06:49,400 Speaker 3: that come with the worst of circumstances. We see this 111 00:06:50,240 --> 00:06:53,599 Speaker 3: and when people feel like they've lost everything and we're 112 00:06:53,640 --> 00:06:57,720 Speaker 3: able to offer even a small amount of compensation, it 113 00:06:57,760 --> 00:07:01,000 Speaker 3: has far more impact than we give it credit for. 114 00:07:01,320 --> 00:07:06,719 Speaker 1: Stay with me, David, we'll be back in a minute. 115 00:07:09,680 --> 00:07:13,280 Speaker 1: I'm speaking to David Berry, CEO of the Compensation Scheme 116 00:07:13,360 --> 00:07:17,600 Speaker 1: of Last Resort with the scheme itself, so it's enabled 117 00:07:17,680 --> 00:07:20,680 Speaker 1: under parliamentary legislation, but it's independently operated. 118 00:07:20,760 --> 00:07:24,320 Speaker 3: Is that right, that's correct. Yes, So the legislation was 119 00:07:24,360 --> 00:07:27,960 Speaker 3: passed late last year and we've been authorized by the 120 00:07:27,960 --> 00:07:31,680 Speaker 3: government to operate the scheme and we've been running for 121 00:07:31,720 --> 00:07:32,640 Speaker 3: the last two months. 122 00:07:32,880 --> 00:07:36,239 Speaker 1: So how important is it to have a last resort measure? 123 00:07:36,480 --> 00:07:39,880 Speaker 1: How big is the issue? And I suppose this comes 124 00:07:39,920 --> 00:07:43,000 Speaker 1: down to financial advice as much as anything else. And 125 00:07:43,000 --> 00:07:45,840 Speaker 1: we've heard so much about that, not just since the 126 00:07:45,880 --> 00:07:49,960 Speaker 1: Banking World Commission and other reviews, but really over ten years. 127 00:07:49,960 --> 00:07:51,920 Speaker 1: And we have this thing called the Quality Advice Review 128 00:07:51,960 --> 00:07:57,120 Speaker 1: going on now. Is it mostly about looking after that 129 00:07:57,360 --> 00:08:01,760 Speaker 1: particular sector and there really need to be a conversation 130 00:08:01,880 --> 00:08:03,960 Speaker 1: scheme of last resort for that sector. 131 00:08:04,760 --> 00:08:07,720 Speaker 3: That's a really good question, Sean. I think a profession 132 00:08:07,840 --> 00:08:10,880 Speaker 3: is judged not by the best elements of that profession, 133 00:08:10,920 --> 00:08:14,280 Speaker 3: but by the worst. And we've got a very challenging 134 00:08:14,360 --> 00:08:17,160 Speaker 3: task here where we're seeing the absolute worst. So if 135 00:08:17,160 --> 00:08:19,240 Speaker 3: to answer your question, do we need a scheme like 136 00:08:19,280 --> 00:08:22,680 Speaker 3: this from what we're seeing, yes, there are people who 137 00:08:23,040 --> 00:08:27,680 Speaker 3: have been taken advantage of. They have through the financial 138 00:08:27,720 --> 00:08:31,040 Speaker 3: misconduct of an advisor or one of the other segments 139 00:08:31,040 --> 00:08:35,240 Speaker 3: that we look after. They have experienced something which would 140 00:08:35,280 --> 00:08:37,839 Speaker 3: be you wouldn't expect anybody to go through. 141 00:08:38,960 --> 00:08:41,880 Speaker 1: Okay, but if I'm a financial advisor, I'm going to 142 00:08:41,880 --> 00:08:43,800 Speaker 1: be saying, well, I'm being hit with a levee here 143 00:08:44,280 --> 00:08:47,560 Speaker 1: for the sins of others, and in this case, one 144 00:08:47,559 --> 00:08:50,280 Speaker 1: particularly large organization seem to have sinned more than others, 145 00:08:50,640 --> 00:08:53,520 Speaker 1: And the advisors would complain that why is it that 146 00:08:53,559 --> 00:08:55,559 Speaker 1: I'm just trying to run a small business, trying to 147 00:08:55,559 --> 00:08:57,600 Speaker 1: make ends meet, and something I've been hit with a levee? 148 00:08:57,600 --> 00:08:59,640 Speaker 1: Why should I be paying for other people's sins? 149 00:09:00,880 --> 00:09:03,560 Speaker 3: It's a question I've been asked many, many times over 150 00:09:03,600 --> 00:09:06,199 Speaker 3: the last two months. I don't know there's an easy 151 00:09:06,240 --> 00:09:08,880 Speaker 3: answer to that. I mean, the simple answer would be, well, 152 00:09:08,960 --> 00:09:12,600 Speaker 3: this is the legislation that's been passed. It had bipartisan support, 153 00:09:12,679 --> 00:09:15,240 Speaker 3: both sides of government have agreed to it. I don't 154 00:09:15,280 --> 00:09:19,560 Speaker 3: think that gives credence though, to the fact that everybody 155 00:09:19,600 --> 00:09:22,000 Speaker 3: says they're doing a good job. I don't think anybody 156 00:09:22,000 --> 00:09:25,720 Speaker 3: admits that they do a bad job. And to support 157 00:09:25,960 --> 00:09:30,880 Speaker 3: the industry, everybody needs to raise the minimum standards. So 158 00:09:30,920 --> 00:09:33,400 Speaker 3: I think the obligation on industry as a whole is 159 00:09:33,440 --> 00:09:37,560 Speaker 3: to make sure that standards that are expected are clear 160 00:09:37,720 --> 00:09:40,840 Speaker 3: and that are upheld. That said, it's not necessarily easy 161 00:09:41,760 --> 00:09:44,800 Speaker 3: for one small organization to say, well I do that, 162 00:09:45,120 --> 00:09:49,200 Speaker 3: so why should I have to pay? The simple fact remains, though, 163 00:09:49,240 --> 00:09:52,320 Speaker 3: that there are people who have experienced this, and they 164 00:09:52,360 --> 00:09:56,360 Speaker 3: will judge this industry based on their experience from it. 165 00:09:56,360 --> 00:09:59,920 Speaker 3: It's a very difficult task because the financial services sector 166 00:10:00,000 --> 00:10:02,280 Speaker 3: a sector I've been involved with for a long time 167 00:10:02,320 --> 00:10:05,280 Speaker 3: and it's one that I feel very passionately about. There 168 00:10:05,320 --> 00:10:08,840 Speaker 3: are far more people in Australia that need advice and 169 00:10:08,920 --> 00:10:11,679 Speaker 3: I would not want the experiences that people that we 170 00:10:11,760 --> 00:10:17,520 Speaker 3: see to discourage people from seeking financial advice. So I 171 00:10:17,559 --> 00:10:21,080 Speaker 3: think knowing that there is a safety net for people 172 00:10:21,120 --> 00:10:25,320 Speaker 3: who have experienced this, regardless of who's performed it is 173 00:10:25,360 --> 00:10:28,240 Speaker 3: something that will strengthen their reputation as a. 174 00:10:28,440 --> 00:10:31,760 Speaker 1: Profession So in a funny sort of way, it actually 175 00:10:31,840 --> 00:10:36,040 Speaker 1: may engender confidence in the industry for those wanting to 176 00:10:36,120 --> 00:10:38,680 Speaker 1: use a financial advisor knowing that there is this scheme 177 00:10:39,120 --> 00:10:40,280 Speaker 1: if all else fails. 178 00:10:41,160 --> 00:10:43,520 Speaker 3: Yes, and look, that's one of the very challenging tasks 179 00:10:43,520 --> 00:10:45,920 Speaker 3: that we have here at the Compensation Scheme of Last Resort. 180 00:10:45,960 --> 00:10:48,959 Speaker 3: It's not just to pay compensation payments. Is to make 181 00:10:49,000 --> 00:10:52,400 Speaker 3: sure that there is good trust and support for the 182 00:10:52,400 --> 00:10:53,280 Speaker 3: industry as a whole. 183 00:10:53,920 --> 00:10:55,600 Speaker 1: David, thank you for talking to Fear and Greed. 184 00:10:55,800 --> 00:10:57,960 Speaker 3: All right, thank you, Sean these David. 185 00:10:57,840 --> 00:11:01,000 Speaker 1: Very, chief executive of the Compensation Scheme of Last Resort. 186 00:11:01,120 --> 00:11:03,320 Speaker 1: This is the Fear and Greed Business Interview. Join us 187 00:11:03,360 --> 00:11:05,400 Speaker 1: every morning for the full episode of Fear and Greed 188 00:11:05,679 --> 00:11:08,240 Speaker 1: Daily business years for people who make their own decisions. 189 00:11:08,280 --> 00:11:10,120 Speaker 1: I'm Sean a Elma. Enjoy your Dame