We knew this was coming: Why accountability in advice must be fixed now

In 2019, I wrote and spoke publicly on YouTube, in the ifa magazine and through professional forums about the need for greater personal accountability in financial advice.

I called for Australia to adopt a version of the UK’s Senior Managers and Certification Regime (SMCR) to bring clarity, cultural change and responsibility into the heart of our sector. Fast forward to 2025, and the warning signs have become reality.

CSLR, special levies, and the collapse of trust

The Compensation Scheme of Last Resort (CSLR) was supposed to be a consumer safeguard. But it has become a lightning rod for deeper systemic issues: the massive Dixon Advisory failure now burdens advice licensees who had nothing to do with it.

Special levies proposed in recent CSLR consultations are penalising compliant Australian Financial Services Licence (AFSL) holders, essentially socialising the cost of misconduct.

Product failure exclusions, capital adequacy gaps and flawed risk pricing are compromising consumer protection and commercial viability.

And through it all, we’re seeing directors and advisers moving from a collapsed advice firm reappear in another organisation with little consequence or accountability for their actions due to a gap in legislation.

What we’re dealing with isn’t just a funding issue.

It’s a legislative design problem and we have the tools to fix it, given the cooperation agreements in place between the FCA and ASIC, such as the Global Financial Innovation Network and the fact that SMCR is public law; ASIC doesn’t need permission to study, interpret or even adopt its principles.

ASIC has referenced SMCR principles in several discussions on improving accountability. SMCR’s success in the UK has made it a benchmark model globally and is being discussed within ASIC’s internal reviews, and by me and many other Australian stakeholders.

We’ve seen this movie before – in the UK

After the 2008 financial crisis and the Libor scandal, the UK faced similar structural failings, including:

• Vague individual accountability.
• Weak enforcement.
• Leaders hiding behind “collective decision making”.

In response, the UK introduced the Senior Managers and Certification Regime under the Financial Services (Banking Reform) Act 2013. It transformed the sector overnight.

How SMCR works – and what it fixed

Below is an overview of what the FCA did to fix the gap in legislation and accountability, and a comparison of where we are in Australia.

Why this matters – especially for financial advice

UK regulators understood that culture starts at the top and that naming responsibility deters misconduct. SMCR legislation embeds accountability into every level of a firm, from senior executives to advisers.

In Australia, the Financial Accountability Regime (FAR) has taken some positive steps, but it does not extend to financial advice firms, unless they’re within APRA-regulated institutions.

This means:

• There’s no requirement for statements of responsibility in advice firms.
• No conduct rules that apply to all staff.
• No annual certification tied to behavioural standards.
• And no clear mechanism to stop directors or advisers from re-emerging elsewhere under a new AFSL after their previous business failed.

At this point, I would state that having built and implemented both SMCR and Australian governance frameworks, the cost and administration involved in formulating SMCR frameworks is negligible.

The Dixon Advisory example shows the gaps

The Dixon Advisory collapse – now at the heart of CSLR funding chaos – could have been mitigated with stronger individual accountability:

• Who was responsible and how were decisions made and signed off?
• What systems failed at an individual and, importantly, organisational level?
• Did conflicts of interest exist, and how were they dealt with?

Under SMCR, this would have been mapped out and attributable. Under current ASIC frameworks, the trail appears to go cold, leaving licensees, taxpayers and consumers to carry the cost.

What needs to happen now

This goes far beyond CSLR consultations. We need to fix the root cause and legislative gap that exists in the industry, which means:

• Extending FAR to cover all AFSL holders, including stand-alone financial advice firms.
• Introduce mandatory responsibility maps and statements of responsibility for all responsible managers, directors and compliance officers of advice businesses.
• Implement annual certification tied to behavioural standards for staff in significant influence roles.
• Create enforceable conduct rules and conflicts of interest rules applicable to all staff, with breach reporting obligations.
• Redesign CSLR to include more equitable risk pricing, capital requirements and proactive supervision – reducing the need for retrospective levies.

Conclusion: We don’t need to reinvent the wheel

The UK has shown that legislative change can work when it’s focused, cultural and structured around individual responsibility. SMCR has embedded better governance, deterred misconduct and changed how firms think about accountability.

Australia is at a crossroads. Without reform, the CSLR will continue to paper over failures rather than prevent them. Consumers will lose confidence. Compliant licensees will foot the bill for those who should never have been licensed in the first place.

The path forward is clear. We need legislation that makes individuals at every level of an organisation truly accountable and ensures our financial advice sector is both trusted and sustainable.

Tony Beaven, managing director at the Guild of Ethics, Culture & Leadership