On the back of an estimated $126.9 million Compensation Scheme of Last Resort (CSLR) levy, which the scheme’s operator announced on Monday, Financial Advice Association Australia chief executive Sarah Abood said there need to be “urgent and significant changes”.
“The latest estimate from the Compensation Scheme of Last Resort is very large and will only get worse once the situation with Shield and First Guardian is better understood,” Abood said.
“This puts a focus on the need to address sustainability of the CSLR as well as the need for greater certainty with respect to the funding. We have been saying for some time that it is imperative that financial advisers should not pay more than the $20 million sector cap which is already very high, particularly when you bear in mind that the vast majority of this levy is paid by small, privately owned firms with very limited capacity to absorb extra costs.
“We urge the government to make urgent and significant changes to the CSLR to ensure fairness and sustainability.”
Similarly, the Financial Services Council (FSC) said the 82 per cent increase from the revised estimate for FY2026 is set to be “materially higher” once the Shield and First Guardian collapses are added in.
“The FSC recognises the CSLR plays an important role supporting and protecting Australians who experience serious financial hardship as a result of financial advice failures, however the scheme must be reformed to ensure it remains genuinely ‘last resort’ and targeted towards those most in need,” said FSC CEO Blake Briggs.
“The FY2027 estimate again includes another significant breach of the financial advice sub-sector cap, this time by a staggering $106.9 million. Without urgent reform to the CSLR’s design, special levies on industry will again be required to meet the gap for the foreseeable future.”
Briggs called the levy “another blow to law abiding financial advice businesses” that are going to be stuck covering the cost for the wrongdoing of others, adding that the FSC opposes normalising the use of ‘special levies’ as a routine funding mechanism.
Among the FSC’s reasons are that special levies are “inherently unpredictable, undermine industry confidence, and function as a de-facto tax on business”.
“The wider financial services sector is willing to do its part to meet the existing shortfall, provided the costs are distributed widely and fairly. A diversified approach avoids disproportionate impacts on individual subsectors and reduces the risk of cross-industry disputes,” Briggs said.
“However, socialising the cost of underwriting investment losses is not a sustainable long-term solution for a scheme that is on track to have continued cost blow outs into the foreseeable future.”
The FSC added that it is urging Financial Services Minister Daniel Mulino to set out a “clear pathway for reform” so that the scheme is sustainable and meets the original policy intent to provide compensation as a last resort.
Levy could ‘cripple’ advice sector
Accounting body CPA Australia also expressed concern over the massive jump in the CSLR levy, with financial advice spokesperson Richard Webb noting that it is “yet another disproportionate and punishing outcome for advisers who have acted responsibly”.
“Legal and regulatory reforms in 2024-25 squeezed the sector already. Now these levy hikes could drive many more advisers out, just as Australians need them most,” Webb said.
According to CPA Australia, based on a figure of around 15,300 advisers left on the Financial Adviser Register as of July 2025, a CSLR levy of $127 million would equate to about $8,300 per adviser.
“The sector cannot go on like this,” Webb said. “Financial advisers are paying the price for failed products and individuals who have left the industry, leaving the rest to pick up the tab.
“Not only are professionals being let down, but consumers are also being punished because the increase in the levy will inevitably increase costs for Aussies seeking affordable advice.
“An effective CSLR must protect genuine victims without collapsing the whole advice system. We urgently need a levy model that is actuarially sound, legally capped and fair to today’s professionals and their clients.”
Everyone seems to feel the need to protest these days. Should advisers join the line and stage a protest! Government only listens if it makes the news.
ASIC has tried to build its various cases against ‘players’ in this scandal on a lack of ‘due diligence’. But what I cannot come to terms with here, is why I have not yet seen a call for ASIC to be accountable for its own lack of due diligence, in a) approving the Shield and First Guardian MISs right at the start, and b) way too little monitoring of them as their asset base grew so quickly and out of proportion to the amount of time they had been available. ASIC received their annual reports, so should have seen that highly unusual growth and investigated much earlier.
Now, as usual, Financial Advisers are to pay for ASIC’s incompetence. I guess also on top of that, any fines ASIC is successful in having handed out to involved and guilty third parties (like Macquarie and Perpetual) will go to government revenue, not back to the cheated investors, making the payments Advisers have to foot larger rather than smaller, while ASIC gets a back-office ‘pat on the back’ from Treasury. This system is broken and needs a body with real integrity to revolutionise it and come up with a whole new, wholesome paradigm.