Could the CSLR levy trigger another adviser exodus?

Last week, the Compensation Scheme of Last Resort (CSLR) publicly released estimates for the new levy that will have advisers paying approximately $1,186 each for the first full year period – starting from 1 July 2024 with payment expected in September 2024.

Additionally, the Australian Securities and Investments Commission (ASIC) levy freeze was lifted last year, causing it to rise from $1,142 to $2,818 per adviser. The combined levies will leave advisers out of pocket just over $4,000.

Speaking on the ifa show last week, the Financial Advice Association Australia’s (FAAA) general manager of policy advocacy and standards, Phil Anderson, discussed the compounding impact of the increased ASIC levy and the CSLR levy being placed on financial advisers and the way it could shape the future of the industry.

“We’ve got to look at the cumulative impact of everything when we consider the cost of doing business. And the cumulative impact is that now we’re talking about $4,000 a year of government sanctioned costs,” Anderson said.

“We need to be aware that businesses are struggling and that the addition of these costs on top of all the others could be the last straw that says, ‘It’s not worth it for me’.

“We’ve got to look at it as another contributor to the already heavy cost burden that financial advisers are taking.”

Anderson noted the declining adviser count since the 2019 royal commission and the industry’s efforts to recoup the losses, which has been further exacerbated by the high educational standards, will only become more challenging with the added financial barriers.

“We’ve got a profession where the numbers have declined by 45 per cent over the course of the last five years and we need to do everything we possibly can to fight to keep as many of the good professional advisors that we have in the profession now and do everything that we can do to encourage new entrants,” he said.

“Why would someone want to come into financial advice when, before they do anything, they know they’ve got to pay $4,000 to the government just to continue to operate? Two thousand eight hundred dollars for the ASIC levy, $1,200 for the CSLR. Four thousand dollars is a big ticket just to join the game.”

Anderson noted, instead of bringing the cost of advice down, these levies will raise the cost even higher, making it less accessible.

“If you think about the average practice having somewhere around 120 clients, we’re already talking of a significant amount of money per client, just as your base government costs. So I don’t think we can dismiss this,” he said.

He added: “Why do good, well-run small business financial advice practices have to pay for the mistakes and misconduct of others?”

To hear more from Phil Anderson, tune in here.