FAAA expects Dixon to push CSLR levy past $100m in FY26–27
Compensation claims regarding United Global Capital (UGC) are a “much bigger issue” than Dixon Advisory, the FAAA has said, but Dixon will be back on the agenda for FY26–27.
On a webinar from the Financial Advice Association Australia, general manager for policy, advocacy and standards, Phil Anderson, discussed the recent increase in the Compensation Scheme of Last Resort (CSLR) levy.
It was announced last month that the CSLR levy for financial advisers for FY25–26 had risen to $70.1 million which the body attributed to complaints about UGC, which had not failed at the time of the previous levy period.
Some $59.6 million of this was related to payments, $8 million was related to AFCA fees, and ASIC costs of $625,000, plus other minor costs.
There were 101 open UGC complaints as of 30 September 2024, and the report said it expects to see a further 240 complaints made by the time UGC’s membership of the Australian Financial Complaints Authority (AFCA) is cancelled on 31 May 2025. The expected average claim size for these complaints is $145,000, higher than the average size for a Dixon Advisory complaint at $121,000.
Anderson said: “In the case of UGC, the actuaries for the CSLR have suggested 307 claims will be paid in the 25–26 year resulting in total claims costs of $44.5 million and AFCA costs of $3.6 million.
“UGC is a much bigger issue in the 25–26 year than Dixon Advisory, and the reason for that is AFCA’s proportion of Dixon complaints will still be focused on pre-CSLR complaints in the 25–26 year. The remainder they will be getting to in the 26–27 year.
“SMSFs are a very big theme in things that end up in the CSLR and that’s because they can be used for good things but can also be used for the wrong purposes.”
Projecting forward to the 26–27 levy, Anderson said there will be an estimated 843 Dixon Advisory claims, paying an average of $122,000 each. AFCA costs will be a significant factor, but he predicted a proportion of these will be rolled over into the 27–28 year.
“There could be $103 million in claim costs for Dixon Advisory clients, and $105–106 million total claim costs plus AFCA fees of $14 million and $3.5 million of additional fees. This is all on the assumption that we don’t see any further material collapses.
“All up, we could see $123 million in the 26–27 year, and that’s on top of the $70 million that’s already been disclosed. The financial advice sector is only required to pay $20 million in each year. What happens above is up to the minister, and we will be seeking that the minister does not charge any more than $20 million, but he has the power to do so.”
Across the two financial years, the cost of the CSLR levy to the financial advice sector could be as much as $193 million which represents $12,500 per adviser.
AUTHOR
Laura Dew
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