SMSF Association Media Release
The SMSF Association says the retrospective effect of the Compensation Scheme of Last Resort (CSLR) levy is a body blow for advisers at a time when the Federal Government’s stated intention is to grow the advice industry.
Association CEO Peter Burgess says: “It’ is extremely concerning that financial advisers are being asked to fund compensation claims for events that occurred before the scheme was operational.
Under the Compensation Scheme, the estimated cost of the first levy period starting on 2 April 2024
to 30 June 2024 will be $4.8 million. For the second levy period, 1 July 2024 to 30 June 2025, the estimated cost is $24.1 million of which financial advice will be responsible for $18.5 million. It will add about $1200 a year to an adviser’s operating costs, with the money to be paid by September 2024.
The biggest legacy payment relates to Dixon Advisory – it went into administration in early 2022 before the CSLR was set up – with about 2000 claims now before the Australian Financial Complaints Authority.
Burgess says we acknowledge the challenges associated with basing the levy on the date the claim was make 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 adds that this extra cost, when coupled with the higher supervisory levy – in 2022-23, the minimum levy for AFS licensees was $1,500 plus $2,818 per adviser – will place an “intolerable strain” on the industry, with the potential to force advisers out or deter new entrants.
“Considering the Quality of Advice Review (QAR) was, in part, about how to expand access to financial advice at a time when Australia is undergoing a massive wealth transfer (the Productivity
Commission estimates $3.5 trillion will change hands in the next 25 years), then we find the retrospectivity aspect of this levy to be counterproductive.
“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 CLSR 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.”