It isn’t surprising that the government decided to push last year’s launch of the Compensation Scheme of Last Resort (CSLR) forward a day to avoid April Fool’s – a tactic being employed once again this year in the form of US President Donald Trump’s so-called “Liberation Day”.
However, 12 months into the CSLR’s operation, it has become increasingly clear that the scheme should have kicked off a day earlier.
The collective outrage at the bill levied to the financial advice profession a year ago almost seems quaint now, with the invoice quickly escalating from $18.5 million for 2024–25 to $70.11 million for the upcoming financial year.
Considering terms like “progressively exploding disaster” and “existential threat” have been consistent descriptors of the scheme, it’s hard to believe how much worse the situation has gotten since they were first uttered.
Now the early projections for FY2026-27 are even worse as the full brunt of Dixon Advisory claims finally flows through to the CSLR, with the Financial Advice Association Australia (FAAA) expecting the levy to come in around the $120 million mark.
But this was always the concern, even if the scale even then wasn’t fully understood.
In those early days of CSLR handwringing, the retrospectivity of including Dixon cases was high on the list of issues – for good reason.
However, there was a feeling that even if that was the only thing that got fixed, the scheme could be at least somewhat manageable – not good, but survivable for advisers.
As things stand today, carving out Dixon would still be a huge help, but large-scale failures have proven to be a far more regular occurrence than anyone had predicted.
United Global Capital (UGC) is already going to make up the bulk of the next levy period at an estimated $44.57 million, while the ongoing Shield Master Fund and First Guardian collapses have the potential to be far more damaging.
At this stage, there is no guarantee that the fallout from either of these will make it to the CSLR, but there is also no guarantee they won’t.
Advice firm Venture Egg – whose director Ferras Merhi is back in Federal Court today – had as much as $440 million in client money invested across the two funds.
Considering the way things have progressed in recent years, there are almost certainly more of these on the way.
If the worst-case scenario plays out with both the known and unknown risk factors, it’s hardly farfetched to worry that the broader advice sector will once again have to pick up the tab.
Unless the scheme is fixed.
How likely is that, though? Considering neither of the inquiries into the CSLR managed to amount to anything substantial before the Prime Minister called the election and the government went into caretaker mode, it feels safe to rule out changes any time soon.
At this point, everyone knows the problems – including both sides of Parliament.
Submissions to the Treasury review have come from all manner of acronyms: FAAA, SIAA, SMSFA, MFAA, IFPA, NIBA – the list goes on.
Yet to be seen, however, is the submission from the CSLR itself.
Speaking with ifa earlier this year, the scheme’s chief executive, David Berry, said: “We will be making a very comprehensive submission, and we will be making it public as soon as we’re allowed to.”
However, ifa understands this won’t happen until Treasury releases submissions itself.
It all looks to be stuck in a holding pattern, even as both the outgoing Financial Services Minister Stephen Jones and his opposite number Luke Howarth have acknowledged the scheme must be fixed.
Yet advisers continue to be treated as though they are a never-ending resource that can cover the costs forever.
In Norse mythology, the beast Sæhrímnir is killed every night and cooked to feed both the gods and einherjar – those that have died in battle and are taken to Valhalla.
Every day, Sæhrímnir is resurrected to be eaten again the following night, providing sustenance indefinitely.
Unlike the great beast, as an already shrinking profession, eventually there won’t be anything left to take.
How about clean up the Industry so that people like Ferras Merhi don’t do what he’s accused of doing and ruining people future nest eggs! the industry complains about the levies, yet these alleged crimes continue and people’s money goes missing. It’s strange that most of the FA people in here complaining are less worried about the financial crimes and more worried about a levy to pay people who’s lives are ruined through dishonest behaviour. WAKE UP!
Ferras has done absolutely nothing wrong. Once again, the media twists the story to make it look like the complete opposite. You’re quick to jump on a keyboard and condemn someone without knowing the full facts — that’s classic keyboard warrior behaviour. Maybe wait until the truth comes out before making baseless accusations & maybe not call yourself Anonymous and hide like a coward.
How would you know this?
What a debacle…just when you think govt or a regulator can’t screw the industry any more they find a way! The over reach of interference but worse the policy imposition has been a serious car wreck. Even the extreme number of adviser exits from the industry not to mention the above avg number of suicides within the industry has been enough to create a re-direction of approach to acknowledge this. Increase govt intervention in ANY industry and you will see a decline
Advisers the only thing you can do to try and get CSLR fixed is to put Labor last and vote them out!
I started my advice business 9 months ago, post PY. The levy is a reason why I’m considering if it’s worthwhile to continue as an adviser, why should I and my client’s pay for the poor financial advice of a handful of bad actors?
It’s worse than that. The bad actors weren’t advisers, they were the executives in Dixons and they have taken the money and run. The company they sold it to spun the clients into a different entity and then filed for administration.
The end result is the intiators got the money, the company that bought Dixons still has the clients, and the advisers have to pay money to the clients who were ripped off.
In what other industry does a CSLR mechanism exist ?
It is tantamount to theft and there needs to be an investigation as to how Treasury and ASIC operate.
Politicians & Bureaucrats Compo Scheme (PBCS) – lets have all these Canberra clowns pay Compo from their wages when they stuff up. Eg, Robo Debt cost taxpayers over $1 Billion in Compensation.
Do Drs pay compensation when drug companies products fail?
Do Lawyers pay compensation when criminals break the law?
Do Accountants pay compensation when Taxpayers don’t pay their correct taxes?
This CSLR either needs to be totally scraped.
Or applied to every other profession or occupation so they can see how stupid it is.
What a shame politicians cant be levied, to fix the past sins of politicians-gone-bad.
Personally, I’m sick of carrying the can for the failures of others.
Who is this Steven Jones? The name sounds familiar but can’t figure out who he is ? Is he the guy that was suppose to fix the advisory industry ??
Stephen Jones acknowledged a lot of things should be fixed 4 years ago. But during Labor’s time in office he has just made things worse. Relying on Luke Howarth to fix things is a gamble. Relying on Labor to fix things is a sure loss.
Howarth is a better gamble than another 3 years of the ALP, or worse, ALP/Greens.