Letter to Mulino urges CSLR/AFCA decoupling
The Assistant Treasurer and Minister for Financial Services, Daniel Mulino has received letters from federal parliamentarians urging him to consider changes to the Compensation Scheme of Last Resort (CSLR) funding architecture.
Core to at least one letter is decoupling CSLR liability from Australian Financial Complaints Authority (AFCA) membership to more fairly spread the cost across multiple sectors.
Financial Newswire has been provided with a letter from Queensland Liberal/National Party parliamentarian, Leon Rebello to Mulino in which he outlines concerns raised with him by a financial adviser constituent, Gayle McKew of Prosperity Planning Partners, about the escalating cost of the CSLR levy.
Rebello’s letter to Mulino outlines not only the situation with respect to the cost of the CSLR but the impact on overall financial adviser numbers.
It states: “Ms McKew is concerned that escalating CSLR levies are prompting experienced, law-abiding advisers to sell or retire early, reducing access to professional advice at a time when Australians face an estimated $4.4 trillion intergenerational wealth transfer.
“She is further concerned that changes to education and experience
pathways commencing on 1 January 2026 will reduce adviser numbers by a further 2,000 to 6,000, potentially leaving as few as 6,000 qualified advisers from
approximately 15,000 today, down from more than 28,000 at 31 December 2018.
She suggests with fewer advisers, the per-adviser levy necessarily rises, accelerating exits among those who have done nothing wrong and shifting costs onto their clients who have suffered no loss.”
“Ms Mckew’s principal objection is that the current model concentrates CSLR costs on only four of the thirty-six potential sub-sectors because liability is effectively tied to
AFCA membership, which is mandatory only for those four classes. ln her view, this arrangement unfairly penalises advisers for the misconduct or failures of others while leaving many market participants outside the funding base.
“She notes your capacity to adjust settings and asks that you consider broadening the contributing classes and decoupling CSLR liability from AFCA membership so that costs are more fairly shared across the sectors that benefit from consumer confidence in the system.
“She cautions that imposing special levies on the remaining cohorts within the four funding classes will hasten the exodus of capable advisers and ultimately harm consumers.
“I would be grateful if you could consider these issues and advise whether the Government intends to review the CSLR funding architecture and possible options to widen the contributor base. My office can provide any further material from Ms McKew that would assist,” Rebello’s letter to the minister said.
We look forward to Mr Mulino’s response to this “hot mess” in a few years time. He is just like his comrade Mr Jones, lots of words and absolutely no action. But you can be assured that the outcome won’t be helpful for the advice profession.
Please publish the 36 potential sub-sectors that should contribute.
Why are only 4 sub-sectors forced into AFCAs kangaroo court ?
Super Fund trustees must be added to AFCAs list, and thus CSLR.
And another 31 sub-sectors too.
Or as other recent articles have noted that a tiny levy on $4.3 trillion in Super & on $4 trillion invested outside super, so everyone invested collectively pays.
I sent a similar email to Molino-no answer
But I took it one step further. I put it to the Minister that it was completely unfair for those advisers who did not advise on investments, such as those who choose to be risk Specialists, should not pay the CLSR levy in any way
I’m bemused. The last 2 failures were huge product failures. This is a financial industry wide problem yet only AFCA members are footing the bill. Here’s an idea. Set a minimum fee for all financial service providers say $1,214 per year. Put a 0.001% levy on all fund managers including listed – we’re being told there are > $3tn in FUM invested in superannuation alone. I understand the investor will wear the cost but at 0.001% will they notice. That should raise somewhere in the vicinity >$300m which should be more than enough to prosecute the bad “eggs”.