The financial advice sector will be on the hook for $18.5 million when industry takes responsibility for funding the Compensation Scheme of Last Resort in FY25.

The government is funding the first period of the CSLR – covering only the final quarter of FY24 – but the financial services industry is required to fund the scheme from FY25 onwards.

This is in addition to the already announced $241 million pre-CSLR complaint estimate that will be paid by the 10 largest banking and insurance groups in the establishment phase of the CSLR, and which is expected will largely cover complaints against Dixon Advisory.

The levy for the first period of the CSLR – from 2 April (after the CSLR officially commences) to the end of FY24 – has been estimated at $4.8 million.

Despite the government covering the levy, the CSLR board broke down the estimates for each subsector, with $2.4 million for financial advice, $900,000 for securities dealing, $800,000 for credit intermediation and $800,000 for credit provision.

The FY25 levy is estimated to total $24.1 million, which consists of $18.5 million for financial advice, $2.3 million for securities dealing, $1.8 million for credit intermediation and $1.5 million for credit provision.

‘Deep concern and disappointment’

In a media release, the Financial Advice Association expressed “deep concern and disappointment” about the cost to advisers. According to ASIC, the levy for advisers is a minimum levy of $100 plus $1186 per adviser.

“The CSLR is intended to promote trust and confidence in the financial services sector and in particular, financial advice,” FAAA chief executive Sarah Abood said.

“However, if advisers are driven out of business by rising costs, through being made to pay for the poor behaviour of those who left the sector years ago, there won’t be a financial advice sector left to have confidence in. Coming as it does on top of an historically high ASIC levy, this flies in the face of making advice more accessible and affordable for consumers, which is the stated aim of our government.”