FAAA seeks explanation of ‘huge’ forecast AFCA claims handling cost

Mike Taylor

Managing Editor and Publisher

20 February 2025

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.