Advisers are on the hook for an even bigger bill, with the estimated Compensation Scheme of Last Resort (CSLR) levy for 2025–26 more than tripling the sector cap as a result of determinations against collapsed firms United Global Capital (UGC) and Dixon Advisory.
The CSLR has released its initial levy estimate for the upcoming financial year, calculated along with independent external actuaries Finity, with the figure skyrocketing to a combined $77,975,000 across all sectors.
According to the CSLR, these funds will support the processing of 1,800 claims across both the pre-CSLR levy and the FY25–26 levy estimate, as well as compensation payments for 491 claims tied to the FY25–26 levy – marking a threefold increase in processing volume compared to FY24–25.
The breakdown across industries is bad news for financial advisers, with the vast majority of $70.11 million being attributed to the subsector.
In contrast, credit provision services will cover $2.80 million, credit intermediaries will pay $2.72 million and $2.34 million is attributed to the securities dealing subsector.
In a separate statement on Friday, Minister for Financial Services Stephen Jones announced the Albanese government is directing the Treasury to undertake a comprehensive review of the CSLR.
“This is all about ensuring the scheme remains sustainable into the future for consumers and for the industry,” Jones said.
While stressing his focus on consumers, Jones said Australians also need access to affordable high-quality financial advice, and as such the review will assess whether the scheme is meeting its objective in a way that is “sustainable for both companies and consumers”.
“Ensuring the scheme is sustainably funded will be an important focus of the review,” Jones said.
The CSLR flagged that the estimated levy was anticipated to exceed the subsector cap of $20 million in October at its inaugural industry forum in Sydney.
Speaking with ifa following the October announcement, Phil Anderson, Financial Advice Association Australia general manager policy, advocacy and standards, said he wouldn’t be surprised if the advice sector levy surpassed the $20 million cap.
However, even Anderson’s worst-case scenario at the time was $50 million – still $20 million shy of the actual estimate released on Friday.
The Australian Securities and Investments Commission is only authorised to levy up to $20 million at a subsector level.
“The amount above $20 million will require funding via a special levy with formal notification of this requirement to be made to the Minister for Financial Services early in FY26,” the CSLR said.
“Consistent with the legislation, CSLR will complete a revised levy estimate for FY26. The consideration of any special levy will be determined by the minister and subject to separate parliamentary approval.”
In a statement, CSLR chief executive David Berry said the “key contributors driving the expected number of claims” are UGC and Dixon Advisory.
Indeed, 92 per cent of expected claims paid for FY25–26 are from the two failed firms.
While the bulk of the focus around the CSLR has been on Dixon Advisory, the impact of UGC on the FY25–26 estimate is far greater at $44.57 million compared with $12.25 million for Dixon.
Importantly, the estimate is based on a range of actuarial assumptions around the ultimate number of UGC complaints that the Australian Financial Complaints Authority (AFCA) receives – UGC must remain a member until at least 31 May 2025 – the speed with which AFCA processes complaints, and the average claim size of the complaints.
Even more stark is the contrast with all other financial advice claims, which total just $2.77 million for the third levy period – less than AFCA fees for processing UGC and Dixon complaints ($3.6 million and $3.2 million, respectively).
Combined, AFCA fees account for $8 million of the $70.11 million attributed to financial advice.
The investment at the centre of the UGC matter is Global Capital Property. It did not fail. It had $15.8 million in cash on hand and a $1.17 NAV. GCPF was profitable and highly solvent. Also, UGC advisers didn’t advise clients into the Product. It was marketed under General Advice by a completely different group of people.
Lets all become money coaches and be done with this!! No compliance, no AFCA, no consents, no SoA’s no CSLR, no licence fees…maybe PI only??
We need to look for Joel Hewish of UGC and send him to jail.He placed us in this predicament.
ASIC did this mate, the full story isn’t being reported.
If the ASIC and APRA fail to identify dodgy advisers selling dodgy inhouse products and stop that, why do we have to pay? It’s not our fault investors lost money. It’s the regulators fault because they failed to do their job.
these clowns have created a moral dilemma here with the CSLR. This shouldn’t exit full stop. Sadly people lose money due to dodgy advisers or dodgy financial products. Financial Adviser should have to fund a compo scheme. ASIC already charges AFSL’s exorbitant levies to industry fund them yet these bad advisers or fin products happened under their watch. plus add the highly aggressive pro-consumer AFCA and soon the ‘Scam” prevention we’r enow faced a situation that investors bad decisions or just bad luck are now 100% underwritten. This is totally unsustainable. Smaller firms will exit and medium firms won’t last that much longer. Turning Financial Services into Target with guarantee’s that if your investment fails or some dodgy advisers happens to screw you over you should be 100% compensated is BS. If people want a guarantee go buy a toaster! Investing has risks. Risks are more than just adverse mkt movements. Its also trusting advisers or firms who aren’t really fit to be in business to begin with.
So true
So sick of our profession banging it’s head against a brick wall for government yo ignore everything then come to the same conclusion after its (deliberately) too late. It sick
Dixon Advisory & United Global Capital were both product failures. It just so happens they were also in the advice space. It’s easier to sash them on advice because the laws are so strict there. In fact they shouldn’t fall under advice at all. Why are advisers covering compensation for product failure. 100% ban and advisers having and connection to product then see what happens to industry.
I’ve just increased my client fees by 25%.
What a joke this whole thing is. Jonesy’s prelection promise to “fix the hot mess” is in tatters. He has done nothing but made it worse…it’s now a boiling cauldron…well done! So now he make a run for it.
I wonder if he’ll run straight into a ready made cushy high paying job, just like Bill Shorten. It amazes me that Shorten presided over the NDIS which sustained losses in excess of $3 billion, yep that’s $3 billion, on his watch & walks into the vice chancellor’s role at Canberra Uni on an eye watering salary of $860k per year. Some might call that obscene.
Time will tell.
Meanwhile, financial planners continue being bashed by outrageous compliance overreach, hideous regulatory fee imposts (including ASIC Industry Funding & now CLSR), AFSL fees & PI Insurance costs. I know of many great advisers who struggle to make ends meet & will likely leave.
And people wonder why the industry (am I game enough to call it a profession?) cannot attract new entrants. I would suggest urgent psychiatric help for anyone considering joining this party!!
If our industry continues to just accept the ongoing, ever increasing inequities, they’ll just keep coming. Instead of just accepting, why not legally boycott for once. I’m sure if we refused to pay the levy the government would take note. This legislation should never have been passed in the first place. We need to stop sitting in the corner sucking our thumbs and really start standing up for ourselves as advisers and make some noise about this. No-one else seems to be doing it.
Unfortunately, ASIC will simply threaten CEO’s of supply firms that if they pay advisers their ability to do business will be curtailed. The answer is for advisers to stop relying on these companies and to get paid by their clients. Then the power shifts from bureaucracy to adviser and clients.
Asvisers should not be liable ever for the bad advice (in this case organised crime by these two major crime syndicates in particular Dixon.
Asic, you gave them a license. We pay you to protect us and yet when you fail in your function we still have to cough up. Saying it exactly as it is. You have failed us and our industry.
It’s kinda like you see a robbery, report it to the cops, the cops do nothing…. then 2 years later the cops send you the bill for the stuff that got stolen.
It’s sick.
Good on you Jonesy. Leave without finalizing the 3 tranches you created which could have been all embracing under Levy till you got involved and now you walk away with a review of CSLR. Have a nice retirement on your Government Pension.
Product providers must share the load. Dixon was a mix of prodcut failure and conflicted advice. Had the product not failed was the advise therefore reaosnable ? A levy on risk insurance premiums, and FUM inclusive of inudstry funds in additon to a fixed amount per adviser makes more sense than the adviser carrying 100% cost of a last resort scheme.
Alan Dixon and David Evans need to be held fully accountable for their unethical behaviour. Their personal wealth should fund the CSLR.
I don’t know any industry where you simply get sent an invoice and have to pay out of your own pocket for another businesses failings that have zero to do with you except being in the same industry and with no accountability at all. Great timing when hard working advisers were sent the industry funding levy fee yesterday and they wonder why our industry is in turmoil with mass exodus and little new entrants
Not even the same Industy Dixon primarily wholesale and funds management just used advice as sales and retail
I’m sure the comprehensive review will provide a “quick win” ensuring we get some relief on the levy in about a decade once we’ve paid for all these big retrospective claims
The whole thing is sickening.
Please, someone, anyone, fix this broken industry.
The removal of the appalling red tape should take an afternoon. Just do it.
If this madness persists they will need to offer a payment plan, small firms with just a few advisers can’t afford this, especially on the back of PI renewal this month and the ASIC Levy due March. I guess the plan is to put small advisers out of business and we all go and work for union super schemes under the pretend adviser monicker?
FAAA needs to grow some balls and stand up for the planners they represent, this is such a joke – what other profession wants good professionals to cover wrongdoing of others.
If Advisers cant band together and tell Canberra / CSLR / Jonsey, TO GET STUFFED AND REFUSE TO PAY.
Then Advisers will simply work for free donating all profits to dodgy MIS Fiasco’s.
If ALL Advisers & AFSL’s refuse to pay let ASIC Ban us ALL.
Time to call Canberra out for this utter BS Theft.
Can we please start referring to Dixon Advisory as “E&P Financial Group owned Dixon Advisory” or “Evans & Partners owned Dixon Advisory”. While it was legal for the owner to place Dixon Advisory into administration, it was morally corrupt and the owner should continue to be associated with this disaster. If James Hewish had any profile, UGC should also be attached permanently to his name whenever it is mentioned.
Yes both the names Alan Dixon and David Evans should always be associated with Dixon Advisory. They both owe their accumulated personal wealth to their unethical behaviour. The law is inept when they can get away unscathed by their immoral activities.
I still don’t “get” why advice is unaffordable. “I hear you”, all the same.
Will Jonesy leave us financial planners with a parting gift of a massive bill? What a freakin joke
Tones of Hamlet – “there is something wrong in the state of ….”. Is there not a saying about rats and ships? Did we see just recently a bid by AFCA to extend their influence over banks etc on scams. AFCA is already so far behind on their existing ‘day to day’ and their hierarchy are looking to do this, again, at the cost of others. $8 million fees on $70 million? Talk about productivity problems in the country.
What a joke! Time for the adviser associations and all advisers to refuse to pay this. Enough of the raping of adviser revenue earned by good advice providing advisers.
And the parent company of Dixon walks away without a care in the world.
that, in particular, absolutely beggars belief
Not only that, they have retained most clients under another AFSL. Criminal!
The world continues to amaze with how this can be the case.
Won’t be paying this from now on!
Alan Dixon and David Evans are both culpable. Both unprincipled who need to be held accountable by the Senate Inquiry into Wealth Mgt Companies.