The Financial Advice Association Australia (FAAA) has used its submission to the Treasury consultation on the Compensation Scheme of Last Resort (CSLR) special levy for 2025/26 to call on the government to cap the levy being applied to advice practitioners for the measure at $20 million.
“We have proposed that the amount above the $20 million sector cap for financial advice – $47.3 million for this year – be allocated to the broadest possible range of sectors on the basis of capacity to pay,” FAAA chief executive Sarah Abood said.
“If the levy is spread as broadly as possible, it is likely to be more sustainable and pose less risk of threatening the viability of any one sector.”
Abood indicated it was not appropriate to ask financial advisers to fund more than the sector cap, given much of this levy is paid by small, privately owned firms with very limited capacity to absorb extra costs.
In its submission, the association pointed out financial adviser numbers have declined in recent years, almost halving since 2019 to stand at 15,364 at the end of the 2025 financial year.
Further, it noted there are now only 5945 financial advice practices in Australia, with an average of only 2.6 advisers per practice, with the vast majority, over 96 per cent, being privately (non-institutionally) owned. The relevance here is it can be harder for small businesses to absorb additional compliance costs.
The industry body recognised this situation will only lead to poorer outcomes for consumers.
“The cumulative impact of the CSLR levy, on top of other government cost recovery action and mandatory fees and expenses, will also serve to further reduce adviser numbers and increase the cost of financial advice, putting it out of reach of more Australians,” the submission said.
Abood also highlighted the product failure element of large collapses in the sector to date by the likes of Dixon Advisory, United Global Capital, Brite Advisory, Shield and First Guardian and the unfair nature of having financial advisers shoulder the responsibility for these events.
“To attribute all these losses to financial advice and to provide no mechanism to allocate these losses more fairly will result in the CSLR becoming unsustainable and ultimately collapsing,” she explained.
In addition, the FAAA called on the government to reinstate the recently discontinued Senate Inquiry into Wealth Management Companies and broaden its scope to include the collapses of Shield and First Guardian.
