David Berry

Approximately $11.5 million of the $18.5 million charged to the advice sector in FY25 will be paid out for compensation, with the rest covering various operating expenses.

The advice sector will cover $9.43 million for Dixon Advisory, along with $2.11 million for other complaints. The rest of the levy will cover AFCA fees, capital contributing from industry and CSLR operating costs, and ASIC costs.

The other $7 million includes AFCA fees ($1.98 million), CSLR operating costs ($4.72 million), capital contribution from industry ($417,000) and ASIC costs ($361,000).

Despite the advice sector covering almost $5 million in CSLR operating costs, the other three subsectors will only account for under $600,000 each, due to a “material portion” of operating costs in the first and second levy period include time spent on pre-CSLR claims, namely Dixon Advisory claims.

During the media briefing in the lead up to commencement of the scheme, CSLR chief executive David Berry noted during FY25 a significant portion of compensation payments (around 80 per cent) would be related to Dixon Advisory.

Berry said that amount was based on a number of assumptions that are expected to “firm up” once the CSLR starts seeing claims come through.

“We are expecting to see… about $12 million in compensation payments in the next financial year,” Berry said.

The backlog of Dixon cases that will end up being covered by advisers has drawn heavy criticism for the industry.

According to estimates from the actuarial consultancy, Finity, which has been engaged by CSLR to help determine the amount of those payments, 1643 of the 2054 of the claims paid will be Dixon related, with some of the work spread over multiple years.

At the same time, Berry stressed that although Dixon’s case was “the largest event”, there would be other firms expecting to receive payments as well.

“Majority of the compensation is allocated towards Dixon, but it is not the only one. There is a number of other organisations that we are expecting to pay compensation to,” he said.

The legislation limits the maximum claim that can be paid to eligible individuals which is up to $150,000 and this cannot be exceeded.

Berry believed that within the first few weeks of operation more than 50 claims are expected to be lodged with the CSLR, with individuals eligible for different amounts of compensation across the four key subgroups which include credit intermediaries, credit providers, financial advisers and general security dealers.

Backlog of complaints

Speaking at the AFCA Member Forum last week, CSLR business lead Tim Goss noted the backlog of complaints is a key focus for the scheme.

Goss said that AFCA has been supportive of “this important work” which saw an increase in the team sizes for the CLSR case management area as well as decision making teams.

“That is an important capacity what we have added into our system in order to be effective and working our way through this backlog of complaints,” Goss said.

“We have recently appointed senior ombudsman, Ian Donald, to specialise in the CSLR related complaints within our investment and advice area. It really is the majority space in which we are seeing in scope complaints related to insolvent financial firms.”

Goss said that some matters, which were within the scope of the CSLR, have been already concluded and the determinations have been issued, with an example being the Dixon Advisory case, while others remained still “under active investigation”.

He also confirmed that a significant component of the complaints under the current backlog was related to Dixon Advisory.

“We’ve also reviewed previously determined complaints at AFCA, under the AFCA scheme, which have already been closed prior to the legislation passing where we know that the compensation wasn’t paid by the financial firm,” Goss said.

“If they are AFCA jurisdiction complaints and then they do fall within the scope of the CSLR, they are important matters for us also to review. We have identified all of those and checked with consumers to make sure that the compensation has remained unpaid and for those matters that fall within that we have provided consumers with the information that they need to be able to make the complaint with the CSLR operator from 2 April.”

Goss also said that there was a number of new financial firms that were becoming insolvent.

“We are undertaking those complaints within our normal operations of AFCA now and we will continue to update everyone on our progress,” Goss said.

“We still have got quite a significant journey before us and AFCA in respect to working our way through the complaints before us.”

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