News the estimates for the CSLR levy for the 2025/26 year will total $70m comes as a shock, says FAAA CEO Sarah Abood.
“If the government’s intention is to bankrupt financial advisers in every town and every suburb, and rapidly increase the already high cost of advice, this is an easy way to do it,” she says.
“It is not hyperbole to suggest that a figure of $70 million represents an existential threat for financial advice in this country.”
Shortly after the figure was released, Treasury announced a review of CSLR. (See: CSLR to be Reviewed).
There is currently a cap of $20 million per year to compensate consumers under the CSLR scheme. However, Abood says even at that level, the cost per adviser will exceed $1,250.
“A special levy will be required to fund the remainder of the [$70m] bill, and we do not yet have any indication as to who will pay this,” she says.
“I am calling on the Minister for Financial Services Stephen Jones MP and Treasurer Jim Chalmers MP to immediately declare their intentions for what will happen to the $50 million of costs that are above the sector cap.”
…$70 million represents an existential threat for financial advice…
The two largest causes to the scheme overrun are Dixon Advisory and United Global Capital, and Abood says it must not be the small business financial advice profession that pays.
“Both were clearly product failures, and yet it is financial advisers who will pick up the entirety of the bill,” she says.
“The Government has been aware of the scale of the problem dating back as far as November 2022, when the Dixon Advisory creditors report revealed that 4,606 clients had lost a total of $368 million,” says Abood.
See: Pressure on Government to Fix CSLR Before Election
CEO of the FSC Blake Briggs says CSLR is unsustainable in its current form and that FSC welcomes the Government’s “recognition the scheme should be reviewed and reformed”.
“The review should consider whether the scheme should continue to compensate consumers who have enjoyed significant capital gains, or instead focus on the needs of consumers who have incurred a loss,” says Briggs.
“This is not the scheme industry supported when it was originally implemented. The CSLR should be efficient and true to label, to make it a genuine ‘last resort’ option for consumers who have lost money due to poor financial advice.”
