Statement on the initial estimate for 2025/26 CSLR costs

Today the Compensation Scheme of Last Resort (CSLR) has announced the actuarial estimates for the CSLR levy that will apply to the 2025/26 financial year.

Sarah Abood, CEO of the FAAA, says: “We are shocked to see an estimated figure of $70 million for the financial advice sector, to cover the cost of claims in the 2025/26 financial year. We have also been told that the numbers could be even higher for the 2026/27 financial year.

“There is currently a sector cap of $20 million per year. Even at that level, the cost per adviser will exceed $1250. A special levy will be required to fund the remainder of the bill, and we do not yet have any indication as to who will pay this.

“This is an eye-watering figure in only the second year of operation for the CSLR and is substantially in excess of previous estimates.

“The two largest contributors to the cost, being Dixon Advisory and United Global Capital (UGC), are both clearly product failures, and yet it is financial advisers who will pick up the entirety of the bill.

“It is not hyperbole to suggest that a figure of $70 million represents an existential threat for financial advice in this country.

“If the government’s intention is to bankrupt financial advisers in every town and every suburb, and rapidly increase the already-high cost of advice, this is an easy way to do it.

“The government surely must now see that the writing is on the wall and that it must fix CSLR immediately.

“We welcome the announcement by Government today that the Treasury will undertake a comprehensive review of the CSLR. However, we note that the FAAA has already engaged with Treasury on many of these issues at the Minister’s request, and he is already aware that these problems exist. The Government has been aware of the scale of the problem dating back as far as November 2022, when the Dixon Advisory creditors report revealed that 4606 clients had lost a total of $368 million.

“The FAAA has also set out its grounds for objections and recommendations to fix these problems in our submission to the Senate inquiry – and yet no witnesses have been called and no appearance dates set.”

“I am calling on Minister Jones and Treasurer Chalmers to immediately declare their intentions for what will happen to the $50 million of costs that are above the sector cap. It must not be the blameless small business financial advice profession that pays this huge bill, when the people who caused this problem are walking away virtually unscathed.

“The problems with the CSLR are known, and urgent. In the context of a looming Federal Election, we urge the Minister to act now on the fixing the issues that are within his power to resolve,” Ms Abood says.

Related

The united voice for financial advice professionals