The Financial Advice Association Australia says it is concerned the government’s announcement on the FY26 CSLR special levy won’t set a precedent for how it is calculated next year, potentially leaving advisers on the hook for a larger share in future and the need to for continuing advocacy.
Minister for Financial Services Daniel Mulino announced advisers and APRA-regulated super funds will be part of a larger cohort to be billed to fund a shortfall in the FY26 Compensation Scheme of Last Resort levy.
But the minister said yesterday that the direction of the FY26 special levy wasn’t a “determinative precedent” for future years.
FAAA chief executive Sarah Abood told a member webinar on Thursday this creates uncertainty for how the CSLR funding commitments will be calculated in coming years.
“The minister has said fairly explicitly that we shouldn’t consider this to be a precedent for next financial year,” Abood said. “FY27 is the one that concerns me even more.”
While the association’s initial reaction to the special levy was to describe it as “unfair and unsustainable”, Abood said the association is pleased the industry didn’t get the worst-case scenario, which would be only advisers paying the levy.
“But even the worst-case scenario this year is not as bad as a medium-case scenario next year,” Abood said. “I’m genuinely concerned it will accelerate departures in our sector.”
Last month, the CSLR confirmed earlier estimates that the FY27 levy will be $126.7 million for financial advice and that early Shield and First Guardian claims could see that figure double.
“Let’s assume that stays at $130 million, that would be a bit over $8600 per adviser on our current numbers,” Abood said.
“If we lose 1000 advisers that’s $9300 per adviser. That’s a concern for everyone because that means our sector is at risk and consumer compensation is at risk as well.”
Financial advisers will cover about 22 per cent of the $47 million FY26 special levy – around $700 per adviser – which FAAA chair David Sharpe said most advisers would “wear” if it was just a one-off.
“But the cynic in all of us now says this is not going to be the end of it, we are going to be copping higher levies for longer and longer,” Sharpe said. “It’s not a sustainable footing for small businesses.”
Mulino held a roundtable with industry participants on Wednesday to discuss the future of the levy.
It is understood that among the participants of the roundtable were representatives of the FAAA, Financial Services Council, Association of Superannuation Funds of Australia, Super Members Council, SMSF Association, Council of Australian Life Insurers and Super Consumers Australia.
Abood is confident the association has the ear of the minister and that they’ve been given the opportunity to make the case that the CSLR is unsustainable for the advice profession that is predominantly dominated by small businesses.
“I don’t have any sense we’re not being heard,” Abood said.
“The minister’s sense was nobody is happy and we can see that by spreading the levy it certainly is less than the worst possible case, which would’ve been the whole of the levy go to our sector, which was the position of a number of people in the room yesterday and many of them have made that public.”
Abood said the best-case scenario – and what the association had advocated for – was to not pay anything above the subsector cap.
“What we thought the likely outcome was, was somewhere between that… the worst-case scenario was we’d pick up all of it,” Abood said.
Sharpe noted the criticism of other parties who are now paying into the levy, and their defence that they shouldn’t have to pay since they were not at fault which has long been the argument of the advice profession.
“That’s the nature of the CSLR: people who didn’t do anything wrong are paying for it,” Sharpe said.
The government also announced other potential policy reforms on Wednesday including as-yet undefined changes to “inappropriate” advice fees, and cooling-off periods for super switching between funds. All are in response to the Shield and First Guardian collapse.
The FAAA believes that a cooling-off period for super switching would have little positive impact for consumers.
“I’m happy to look at anything that has a chance of working, but I’m sceptical it would’ve made any difference to Shield and First Guardian though,” Abood said.
“For most consumers their concerns emerged when they logged onto their super and saw their balance as zero.”
The government said it would also look at changes to anti-hawking laws to close loopholes used by lead generators, including potentially requiring them to have a license.
FAAA has been critical of the role played by cold callers in the Shield and First Guardian collapse, and Abood said it supports these changes.
“I don’t think anyone on this call would be in any doubt that we are very concerned by those activities,” she said.
“We don’t believe they are consistent with a professional service like financial advice. Our interest will be making sure we can shut it down effectively without creating reams of red tape but also ensuring advisers are still able to market their businesses.”
