FAAA seeks explanation of ‘huge’ forecast AFCA claims handling cost
The Australian Financial Complains Authority (AFCA) needs to confirm the legitimacy or otherwise of an actuarial report suggesting that its costs for handling claims is forecast to escalate from $12,450 per claim in 2024/25 to $21,334.
The question has been posed by the Financial Advice Association of Australia (FAAA) as it continues to express deep concern at the escalating cost of the Compensation Scheme of Last Resort (CSLR) and the input to those costs of AFCA and the Australian Securities and Investments Commission (ASIC).
The big increase in AFCA costs has been signalled by actuary’s report on the CSLR but is yet to be formally verified.
FAAA general manager, Policy, Advocacy and Standards, Phil Anderson has pointed to the substantial increase in AFCA fees describing it as a “huge increase” and pointing out that AFCA itself has yet to explain why.
Indeed, a breakdown of the actuary’s report also suggests that Australian Securities and Investments Commission’s costs will nearly double in 2025/26 rising from $361,000 in the current financial year to $625,000 next financial year.
AFCA’s fees, according to the actuarial data, will rise from $1,978,000 in the current financial year to $13,989,000 in 2026/27.
In an article discussing the issue, Anderson said the rises, if confirmed, represented really bad news for financial advisers.
“Not only will the advice profession need to pay for the AFCA fees for all the post-CSLR Dixon Advisory cases, all the UGC cases and any other financial cases; if this significant jump in AFCA fees occurs, then it puts the pre-CSLR total cost at risk,” he said.
Anderson noted that the CSLR legislation had been amended by the Government in early 2023 with the effect that financial advice profession would need to meet excess costs of claims which were lodged ahead of the CSLR.
“There are 1,654 pre-CSLR Dixon Advisory cases,” he wrote. “If the cost of AFCA processing these cases goes up by roughly $8,900 each then we are talking about an extra $14.7 million.
AFCA is a bad joke for advisers and are considered to be the Mafia of the industry
Bureaucracy with an open cheque book = Advisers cheque book and no care in the world about racking up costs or paying for mythical but for returns
I feel sick.
AFCA, in its current form, is not fit for purpose. What was meant to be a dispute resolution scheme has instead morphed into a de facto free legal aid service, incentivized to accept as many complaints as possible. This is not just a cultural issue—it’s a structural conflict of interest. The more complaints AFCA processes, the more revenue it generates, creating a perverse incentive to widen the net and lower the bar for what constitutes a valid complaint.
A prime example of AFCA’s overreach is its effective rewriting of the statute of limitations. By starting the clock from the date of “loss discovery” rather than from when the advice was given, it has rendered standard run-off cover practically meaningless. Advisers operate under a seven-year cover period in line with statutory requirements, yet AFCA has unilaterally extended liability indefinitely, exposing advisers to claims long after they have left the industry.
Even more concerning is the unchecked power AFCA wields. There is no right of appeal, no oversight mechanism, and no accountability. Its decisions are simply assumed to be “fair,” yet advisers have no recourse when those decisions are flawed.
Now, we see an avalanche of new money being funneled into AFCA, with its claim-handling costs forecast to skyrocket. This is not a sign of a well-functioning system—it’s further evidence that AFCA is an expanding bureaucracy feeding on an industry it was supposed to regulate fairly. The sector urgently needs reform, starting with putting real checks and balances on AFCA’s power.
Blame Senator Jane Hume for creating the AFCA Frankenstein. We had two EDR’s to chose. FOS (who were hopeless) and CIO (who were good at what they did)
The libs dumped them and AFCA was born and it was born with all the rotten people who were over at FOS.
Our sector has been doomed ever since
Bureaucracies grow. Always.
When the Liberal Party creates them, this is inevitable.
How does it cost $8,900 per case?
Only a town like Canberra can come up with crap like this.
A few years ago I watched this documentary about an African country (I won’t name it).
The doco makers went to the University there and said to the students, what would you like to do when you finish your studies? 95% of them responded saying they want to work for the Government.
About 10 minutes later into the documentary, they spoke about the Government Health Department spending on medical care.
What happened was the Health Department had purchased 275 or so brand new Toyota 4WD for the Government Employees to use. Images of them all in the carpark everywhere with the employees walking into the office.
They also purchased 4 ambulances for the people.
The bulk of this funding was foreign aid.
More useless posturing from the FAAA
Australia doesn’t need Canberra. We’d all be better off without it.