Could risk-only advisers get out of CSLR?

Essentially since the Compensation Scheme of Last Resort (CSLR) was first established, but particularly in the last 12 months, there has been an ongoing debate about if and how managed investment schemes (MISs) should be brough under the scheme to foot some of the ever-growing bill. 

Treasury recently wrapped up its consultation on the scheme in May, and in its submission response, the Financial Advice Association Australia (FAAA) once again argued its case for the inclusion of MISs under the scheme. 

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“It is fundamentally unfair and unsustainable that other sectors connected to wrongdoing – such as MISs – should be allowed to wait until the financial advice profession has paid $40 million before they are expected to contribute a single dollar,” the submission said. 

“The [CSLR’s] complete lack of fairness and a level playing field … must be addressed. Other sectors involved, in particular MISs and super funds, should be able to be pursued by impacted clients who have suffered a loss.” 

FAAA chief executive Sarah Abood recently took to the stage at an industry event to discuss Treasury’s suggestion to parse out ‘less risky’ portions of the MIS sector. 

“The proposal was that MISs would be pulled into the special levy calculation only, but also that perhaps we could define a category of MISs as being low risk, and they wouldn’t have to pay,” Abood said. 

“It’s probably not surprising to anybody in this room that we did not support that proposal. MISs should be in. They should be paying from the start. AFCA should be able to apportion loss against various sectors, and [MISs] should be making their contribution.” 

While it’s unclear at this time what Government will choose to do in this matter, Abood took the opportunity to offer a counter for if the scheme goes ahead sans MISs. 

“If the government is going to start defining areas of various sectors that are lower risk, we will put our bid for life insurance advisers who are having to pay for this thing along with everybody else, but so far, as I’m aware, there’s been no life insurance collapse. 

 “We would certainly argue that, even in the context of the CSLR, risk advisers are less risky.” 

Looking at AFCA’s publicly available data, the complaint’s authority accepted just 13 complaints made against a financial advice business about a life insurance product in the 2025/26 financial year up to 30 April. 

Balancing fairness is always a consideration though, and Phil Thompson, chief executive of Skye Wealth, said that while this suggestion would ultimately benefit his risk advice business, there would still be plenty more advisers who are also doing the right thing but getting stung with the bill for other’s bad behaviour. 

“We’re paying tens of thousands of dollars as an insurance only business for a fine that has nothing to do with what we do. Whether it ever gets up, I doubt it. I also feel bad for all the other advisers because it’s only going to increase their bill,” Thompson said. 

Given there are fewer than 200 risk-only financial advisers, approximately, the removal of these advisers from the pool of payees is arguably small. 

On an individual business level, however, the impact would be significant, with Thompson stating that his most recent CSLR bill totalled around $16,000.