Financial services CSLR Levy hits $198m

The Compensation Scheme of Last Resort (CSLR) has increased the estimated FY27 levy to be paid by the financial services sector to $198.1 million, a $60.7 million increase from its initial estimate announced in November 2025.

The latest update expects to conclude the final cohort of claims related to Dixon Advisory, while including the first tranche of some 474 claims from the collapses of Shield and First Guardian Master Funds. These claims represent over $30.1 million in gross claim payments according to data provide by the CSLR.

The first tranche represents only around 10% of approximately 3500 complaints submitted to the Australian Financial Complaints Authority (AFCA) in relation to the managed investment schemes. In total, the CSLR has processed 1567 claims, up from 912 in the initial levy estimate, it said.

As a result, the personal financial advice sub-sector will see its responsible levy skyrocket to $190.3 million, a $63.4 million increase for the new financial year.

CSLR chief executive David Berry highlighted the $200 million in compensation to more than 1600 victims paid by the CSLR since inception were largely results of money lost from "defective personal financial advice".

"Unfortunately, we see the disproportionately negative impact of individuals within the financial services sector who have done the wrong thing," Berry said.

"That impact weighs upon the whole sector and comes at the expense of the lasting emotional, physical and financial wellbeing of individuals working hard to save for retirement."

Berry added the broader impact on the financial advice sector also includes the loss of the public's trust due to the large-scale of these collapses.

"The CSLR has now been in operation for two years. Our experience indicates that the overwhelming majority of claimants believed they were taking a prudent and positive step by placing trust in a professional to provide expert advice in a complex financial system," Berry said.

"Many are now left feeling as though that this trust was misplaced."

Reacting to the update, Financial Advice Association Australia (FAAA) general manager of policy, advocacy and standards Phil Anderson told Financial Standard the increase did not come as a surprise, instead he was expecting worse.

"I'd have to say we feared it could be worse, and I know that sounds strange, but we had strong confidence that what [the CSLR] had in their initial estimate in November last year was fairly well thought through," Anderson said.

"Dixon advisory makes up the largest proportion of it, and the CSLR has been working on those cases for three years now, so that's no surprise."

He also said the sheer scale of the complaints received over Shield and First Guardian have already surpassed Dixon Advisory's, and the levy will only be likely to grow from here.

"The updated numbers only included $30 million for Shield and First Guardian... it's not a big surprise, but it's a very concerning number, and we fear that there's prospect of substantial special levies to come for at least the next two years as they work through the Shield and First Guardian matters," he said.

"It is critical that changes are made to the CSLR to make it more sustainable, and changes are made to the regulatory regime to ensure that we don't see a repeat of a similar type of collapse."

He is now urging the government to cap the total CSLR levy so that advisers pay no more than $20 million until adviser numbers are sustained to ensure no Australians are missing out on the advice they need.

"The financial advice profession is made up primarily of small and micro businesses, with an average of only 2.5 advisers per practice. These small businesses have little ability to absorb additional significant costs, and the FAAA's member survey in April this year shows many are considering leaving the profession and abandoning recruitment plans," Anderson added.

Meanwhile, SMSF Association chief executive Peter Burgess is calling for an immediate reform and highlighted the levy should be aimed at bad actors.

"Consumers should have access to financial compensation where they suffer financial loss from poor or negligent financial advice or product failure. But holding a sector accountable for the failures of firms that intentionally prioritise profit to the detriment of their clients is both unsustainable and unjust," Burgess said.

"It also demonstrates that the current design is creating moral hazard, contributing to the increasing scale of potential CSLR liabilities being borne by the retail financial advice sector.

"Most importantly, the policy focus must turn to preventing these large-scale failures that result in significant consumer financial detriment from occurring in the first place, not just how losses are funded after the harm has occurred."