Jones instigates CSLR review, levy hits $70mBY KARREN VERGARA | FRIDAY, 31 JAN 2025 12:43PMAs new estimates show that financial advisers will have to fork out $70 million to fund the Compensation Scheme of Last Resort (CSLR) for the next financial year - breaching the $20 million cap - Treasury is now calling for a review of the controversial scheme. The CSLR today released its FY26 levy estimates and blamed the failures of Dixon Advisory & Superannuation Services (DASS) and United Global Capital (UGC) for the massive bill. A whopping 92% of the total claims it expects to pay relate to these two firms. Of the $77.9 million total estimate, $70.11 million is apportioned to financial advice, $2.8 million to credit provision services, $2.72 million to credit intermediaries, and $2.34 million to the securities dealing. "There was no allowance for a failure like UGC in the levies for the 1st and 2nd levy periods (UGC had not failed at the time). This means that CSLR may be limited in its capacity to pay these claims if they are resolved in 2024-25 and therefore payments for UGC-related claims are assumed to occur in 2025-26," the CSLR said. The Financial Advice Association Australia chief executive Sarah Abood expressed her concerns with the "eye-watering figure" that are substantially out of whack with estimates. "We are shocked to see an estimated figure of $70 million for the financial advice sector, to cover the cost of claims in the 2025-26 financial year. We have also been told that the numbers could be even higher for the 2026-27 financial year," she said. CSLR chief executive David Berry said: "In line with our administrative function, we have, with the assistance of external actuaries, calculated the initial levy estimate for FY26. As previously foreshadowed in October 2024, the estimate exceeds the $20 million sub-sector cap for personal advice." "The key contributors driving the expected number of claims are attributed to Dixon Advisory & Superannuation Services and United Global Capital." Abood said: "There is currently a sector cap of $20 million per year. Even at that level, the cost per adviser will exceed $1250. A special levy will be required to fund the remainder of the bill, and we do not yet have any indication as to who will pay this. It is not hyperbole to suggest that a figure of $70 million represents an existential threat for financial advice in this country." This will be determined by the relevant minister at the time. Assistant treasurer Stephen Jones this morning announced that the Albanese government is directing Treasury to undertake a comprehensive review of the CSLR to ensure victims of financial misconduct have a sustainable avenue for redress. "This is all about ensuring the scheme remains sustainable into the future for consumers and for the industry," Jones said as he prepares to exit politics. "Taking care of consumers is the focus of the scheme, it's the focus of the Albanese Government and it will be the focus of this review." Abood commented: "We welcome the announcement by government today that the Treasury will undertake a comprehensive review of the CSLR. However, we note that the FAAA has already engaged with Treasury on many of these issues at the minister's request, and he is already aware that these problems exist." She added that 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 4606 clients had lost a total of $368 million. "I am calling on minister Jones and Treasurer Chalmers to immediately declare their intentions for what will happen to the $50 million of costs that are above the sector cap. It must not be the blameless small business financial advice profession that pays this huge bill, when the people who caused this problem are walking away virtually unscathed," she said. "The problems with the CSLR are known, and urgent. In the context of a looming federal election, we urge the minister to act now on the fixing the issues that are within his power to resolve." CPA Australia's spokesperson on financial advice Richard Webb said reports suggest that financial advisers will see the CSLR levy rise dramatically in 2025-26 and potentially jump from $1186 to $4516 - an increase of more than 250% in just 12 months. "This is not only disproportionate and unfair on the already under siege financial advice sector, but it will create a further disincentive for people to join an already costly profession," he said. "What's more, the increased fees incurred by professionals will make the cost of receiving financial advice prohibitive for many ordinary Australians. The cost of providing financial advice is already considerable." Financial Services Council (FSC) chief executive Blake Briggs said 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. "It does not align with community expectations that 80% of the compensation being paid by the scheme has been for foregone, hypothetical capital gains, not the actual losses a consumer has incurred," he said. "It is in the interests of the government, ASIC, and consumer groups, as well as the industry and its customers, for the CSLR to be sustainable over the long term. Clearly this is not currently the case." Related News |
Editor's Choice
Local family office backs new venture to invest in climate tech
FSCP deregisters adviser for two years
SMSFs outperform APRA funds over five years: Research
Global X launches Russell 2000 ETF
Products
Featured Profile

Raelene Seales
PRIME SUPER