CSLR blowout to 'further decimate financial advice sector', says CPA
The increased costs for professionals resulting from the levy will put financial advice further out of reach for Australians, the professional body has warned.
CPA Australia and the SMSF Association have both welcomed the government's announcement of a review into the Compensation Scheme of Last Resort after recent data revealed more than a threefold increase in the industry funding required.
Reports suggest that financial advisers will see the CSLR levy rise dramatically in 2025–26 from $1,186 to $4,516 – an increase of more than 250 per cent in just 12 months.
Minister for Financial Services Stephen Jones announced last week that the Albanese government has asked 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,” Minister Jones said in a public statement.
It was estimated that the total cost of financial advice claims to be paid from the scheme in 2025–26 would be $70 million, with the failures of firms Dixon Advisory Superannuation Services (DASS) and United Global Capital (UGC) expected to make up the bulk of claims.
CPA Australia warned the increased levy costs were "disproportionate and unfair" for the financial advice sector and would create a further disincentive for people to join an already costly profession.
"What’s more, the increased fees incurred by professionals will make the cost of receiving financial advice prohibitive for many ordinary Australians. The cost of providing financial advice is already considerable," the professional body said.
CPA Australia’s spokesperson on financial advice, Richard Webb said he was pleased the government has recognised the failings of the CSLR but warned it would need to act quickly "to save a financial advice sector currently on its knees".
“The issues of the past, perpetrated by the few, are being paid for by the financial advisers of today who have been doing their jobs properly and diligently the whole time. The sector cannot go on like this," Webb said.
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 in the sector being let down, but consumers are being punished too as the increase in the levy inevitably increases costs for individuals seeking affordable financial advice," he said.
SMSF Association chief executive Peter Burgess said with the estimated $70 million in claims exceeding the $20 million sector cap, a special levy will be needed to make up the estimated $50 million shortfall.
“Given the legislative process that must be followed, it is likely multiple levy invoices will be issued to financial advisers in quick succession, with further levy increases likely in future years. This is not sustainable," Burgess said.
Burgess said the government review must consider the scheme's objectives and whether they were being met.
It should also examine ways of reducing costs by improving the administrative efficiency of the scheme, and how the stability and predictability of CSLR levies can be improved. Importantly, the review must deliver tangible and timely outcomes, he added.
