SMSFA calls for immediate CSLR overhaul

On Monday, the Compensation Scheme of Last Resort released its FY27 initial levy estimate which has blown out to $137.5 million, a figure which did not include the ramifications from the Shield and First Guardian collapses.

Peter Burgess, CEO of the SMSFA said the estimate confirms the pressing need for the CSLR to undergo substantial reform, particularly in relation to how the scheme is funded.

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“The FY27 estimate which assigns $126.9 million of the total levy to the personal financial advice sub-sector, again demonstrates the disproportionate cost borne by the financial advice profession,” Burgess said.

“We support the principle of a last-resort compensation scheme, but it is unfair and unsustainable to expect the financial advice profession alone to pick up the cost of failed advice and products.”

Burgess noted that the estimate has been published without incorporating any impact from potential Shield of First Guardian claims, with the scheme itself acknowledging that a revised estimate in mid-2026 is expected to increase should those claims materialise.

“This level of uncertainty is a significant concern for the advice profession, and advisers are being asked to absorb rising and unpredictable costs stemming from failures they played no part in, and there is no indication that the frequency or scale of these failures is easing,” he said.

With the CSLR already signalling that the FY27 revised estimate is likely to exceed the initial figure, the association said the financial advice sector deserves greater transparency and a clear pathway towards sustainability.

It stated there is concern the sector is still waiting to hear if it will be required to pay a special levy to fund the previous levy period’s shortfall of more than $50 million, which now on reflection pales in comparison.

“The review was established with the objective of assessing the long-term sustainability of the scheme,” Burgess said.

“Those findings are now critical to informing the next steps, and the profession cannot continue operating under escalating levies and unresolved funding uncertainty.”

Additionally, the CPA has expressed its “deep concern” about the dramatic increase in the CSLR levy arguing it could “cripple” the financial advice sector.

CPA Australia said the increase in CSLR could see more experienced advisers quit and the levy increase will make finance advice harder to find and more expensive.

Richard Webb, CPA Australia’s spokesperson on financial advice, said the rise in the cost of the scheme is driven largely by historic failures in the sector, and the latest estimate is significantly greater than the $75.7 million levy confirmed for the 2026 financial year and would be six times more than ASIC’s $20 million cap. In 2024, the levy placed on financial advisers was just $4.8 million.

“This is yet another disproportionate and punishing outcome for advisers who have acted responsibly,” Webb said.

“Legal and regulatory reforms in 2024-25 squeezed the sector already. Now these levy hikes could drive many more advisers out, just as Australians need them most.”

Webb continued that the number of financial advisers listed on the Financial Adviser Register has almost halved in six years, down from 26,500 in 2019 to about 15,300 as of July 2025.

Based on these numbers, a CSLR levy of $127 million would equate to about $8,300 per adviser.

“The sector cannot go on like this. Financial advisers are paying the price for failed products and individuals who have left the industry, leaving the rest to pick up the tab,” he said.

“Not only are professionals being let down, but consumers are also being punished because the increase in the levy will inevitably increase costs for Aussies seeking affordable advice.

“An effective CSLR must protect genuine victims without collapsing the whole advice system. We urgently need a levy model that is actuarially sound, legally capped and fair to today’s professionals and their clients.”