FAAA canvasses Govt cost-recovery scheme for CSLR

Mike Taylor

Managing Editor/Publisher, Financial Newswire

5 February 2026

The cost of the Compensation Scheme of Last Resort (CSLR) to the financial advice sector should be defrayed by the Government replicating the workings of the Fair Entitlements Guarantee Recovery Program (FEGR), according to the Financial Advice Association of Australia (FAAA).

The FAAA has used its pre-Budget submission that such a move would improve the sustainability and could be deemed a government-funded ‘Friend of the CSLR’.

The FAAA’s submission has pointed to the inherent moral hazard reflected in the CSLR funding mechanism and its disproportionate impact on financial advisers.

“In the relatively short life of the CSLR, we have already observed a number of financial firms going into administration or liquidation, leaving clients exposed to a loss of investments and an inability to make a claim to recover the loss,” the submission said.

“The CSLR has provided a pathway for these clients to seek remediation, however this places the CSLR in a position where they need to then seek recovery from the firms where funds may be available or recovery action may be possible against the firm, directors or officers.

“Pursuing this action often requires funding, and the administrators/liquidators seem very hesitant with respect to the pursuit of these matters. Equally, the CSLR may not be designed or resourced to undertake this activity,” the FAAA said.

“The outcome is that often those who are responsible go unchallenged, which ultimately undermines confidence in the system as a whole.”

“The pursuit of this recovery activity, including the availability of resources to investigate the underlying conduct, is important in seeking to minimise the cost to those who would otherwise need to contribute to the cost of funding claims paid by the CSLR,” it said.

“The Fair Entitlements Guarantee Recovery Program provides a strong example of the value of such a solution. We believe this role could be played by an entity established and funded by Government as a ‘Friend of CSLR’.”

Releasing the submission, FAAA chief executive, Sarah Abood also pointed to the declining number of financial adviser and the action needed to arrest that decline.

“We have been in ongoing discussion with all sides of politics, and across the board there is agreement that we need more professional financial advisers in Australia.

“However, action is needed. The decline in the number of advisers has been an issue for some time, and the pipeline of new entrants is nowhere near sufficient to rebuild the profession.

“The FAAA proposes a package of reforms that will help increase the supply of professional financial advisers and ensure we retain talent at key career points (university, mid-career transitions, parental leave etc). Government action is required to clear critical roadblocks that hinder adviser entry into, and retention within, the profession.”