The retrospective nature of the compensation scheme of last resort (CSLR) levy that is to be imposed on advisers will place a heavy strain on financial advisers and runs counter to efforts to make advice more accessible and affordable, the SMSF Association has claimed.
Following the announcement the CSLR will impose a levy of $18.5 million on the financial advice sector, or about $1200 per adviser, for the next financial year, SMSF Association chief executive Peter Burgess has been critical of the fact the impost applies to complaints made before the creation of the scheme.
“It is extremely concerning that financial advisers are being asked to fund compensation claims for events that occurred before the scheme was operational,” Burgess said, referencing legacy payments before the Australian Financial Complaints Authority (AFCA) that predate the scheme’s commencement on 2 April this year.
He specifically noted there were 2000 legacy payment claims before AFCA related to Dixon Advisory, which went into administration in early 2022, that current practising advisers and licensees would have to pay for from the levy.
“We acknowledge the challenges associated with basing the levy on the date the claim was made rather than the date the claim was finalised, but to alleviate the current financial pressures on financial advisers, the government has a perfect opportunity to get behind the financial advice industry and agree to fund a much greater proportion of these legacy claims,” he said.
He added the CSLR levy when combined with the Australian Securities and Investments Commission (ASIC) supervisory fee of $1500 per Australian financial services licensee and $2818 per adviser would place an “intolerable strain” on the advice sector.
“Considering the Quality of Advice Review was, in part, about how to expand access to financial advice at a time when Australia is undergoing a massive wealth transfer, then we find the retrospectivity aspect of this levy to be counterproductive,” he said.
“We are also deeply concerned for licensed accountants who, under a limited licence, cannot advise on specific investment products, but are included in the financial advice pool and therefore subject to the ASIC supervisory levy and the CSLR levy.
“Licensed accountant numbers have significantly declined and we are now at risk of losing this important cohort in the financial advice ecosystem at a time where the focus should be on accessibility and affordability of financial advice.”
