At its inaugural industry forum in Sydney on Wednesday, the Compensation Scheme of Last Resort (CSLR) said it expects the upcoming 2025–26 levy attributed to personal financial advice will exceed the $20 million subsector cap.
The CSLR shared some of the key assumptions that will be relied upon as it embarks on the complex process, with consulting actuary Finity, to formulate the estimate for levy period 3 (FY25–26). The total levy estimate is expected to be lodged with Parliament when it resumes sitting early next year.
According to the CSLR, the process of confirming the levy estimate is “complex and heavily dependent” on both the Australian Financial Complaints Authority’s (AFCA) estimates of how many complaints will be resolved and proceed to the CSLR in FY25–26 and “the inclusion of any other large-scale firm failures”.
While the body noted that the Dixon portion of the compensation estimate is “unlikely to change significantly”, it will likely be spread over multiple levy periods depending on the timing of complaints being resolved with AFCA and people subsequently lodging a claim with the CSLR.
Speaking with ifa in May, Financial Advice Association Australia general manager policy, advocacy and standards, Phil Anderson explained that Minister Jones would have a variety of options available to him to deal with a levy that exceeded the sector cap.
“He’s got power up to $250 million total spend to levy as he wishes,” Anderson said.
“He could attribute all of it to the advice profession. He could spread it over a broader base of sectors above and beyond those who are already covered by the CSLR, or he’s got the option to seemingly have CSLR pay out in instalments, so clients don’t get all of the money they’re entitled to in the one year.”
The CSLR provided an overview of its progress since the scheme launched in April 2024 and the roadmap for the next six months.
“It has been rewarding to have paid 91 claimants ($9.1 million) in compensation in our first five months of operation. These claimants who previously had no opportunity to recover the loss from their experience with financial misconduct have now been able to access some form of compensation,” CSLR CEO David Berry said.
He added: “Within the financial sector we recognise the majority do the right thing and at the CSLR we see the small proportion that undermine the strength of the whole sector. Where we can, we are committed to updating the industry on what we know about future levies as well as providing insights we have gleaned from the claimant’s experience with the sector.”
The CSLR also reiterated its commitment to working closely with Treasury, the Australian Securities and Investments Commission, AFCA and the minister in providing early insights into the operation of its legislative framework.
“While we continue to fulfil our legislative obligation to provide some basic consumer protections, our focus remains on ensuring the CSLR is well positioned to build consumer trust in the financial services industry,” Berry said.
David Berry will appear on an upcoming ifa webcast on the CSLR. Register here.
Why are good quality and reputable Advisers being forced to pay a levy for misconduct of negligence by other Advisers? This would be front of the news if it was a different industry.