Advisely PartnerPhil
I am a terrible driver...I speed down my suburban street; I run every amber light; my car is barely road worthy; and I care not a whit for other road users.
My wife and my children conversely are all excellent drivers - they never speed down any street; never cross any amber light; and they care deeply for other road users.
If in my haste to get to the pub (my other failing) I had run over one of the effected Dixon clients with my car outside their house...would Society expect that my wife, my family, or the neighbours in my street contribute to the compensation due to the Dixon client's family? Or would they recognise my family's blemish free driving record? And pity them for being related to a scrouge of the roads?
Would Society expect that my local council place a levy on the council rates applicable to properties in my suburb, or my street, to compensate the client's family? Or would Society expect that I, and I alone, be punished?
If I had fled the scene of the accident would that change? Would Society's view change? Would they say to my family "You share his surname - you can pay his dues and spend his time in prison?"
I think not.
To extend the metaphor to breaking point, therefore I am not sure why "the neighbours" are being asked to contribute (as the primary and only source of funds) for someone else metaphorically "running over" that client's wealth.
The system, as it is, represents capitalism for any profits and socialism for any losses. The CLSR, as it stands, promotes moral hazard. Dixon Advisory could (and did) recommend packaged elephant poo as the elixir for financial health knowing that if didn't work everyone else would pay.
And we are...
Advisely PartnerHi Daniel, Thanks for your comment. I think I understand your point, although you have certainly driven me down the garden path. Obviously, with the CSLR, we are stuck in a regime where the good advisers pay for the mistakes of a very few, who do the wrong thing. It is worse because we might end out paying for the mistakes of other sectors such as fund managers, rating houses and super funds, if the Shield and First Guardian matters turned out the wrong way. That is why we are closely watching the actions of ASIC in seeking to get the super fund trustees to pay for Shield and First Guardian before it even lands in the CSLR.
No one is denying that there are flaws in the design of the CSLR. In the absence of the CSLR, there would be calls for a solution to fix the plight of the Shield and First Guardian clients. The reality is that these matters have done damage to consumer trust in financial services more broadly. Things need to change to reduce the risk of this happening again in the future.
In your example, it would probably be your CTP cover that would pick up the cost of compensation for the person who you ran down, however if you had no insurance, they could come after you, which would ultimately have a flow on consequence for your family, if you had to sell the house to pay the court awarded damages. You have put a lot of thought into this. I think finding analogies to demonstrate how unfair the funding of the CSLR is, can be a good way to make the point that we are seeking to make. Thanks.
