Unanimity on dumping AFCA’s ‘but for’

Mike Taylor

Managing Editor and Publisher

23 June 2026

The major accounting and financial advice groups have reinforced a unanimous view that a Government priority in addressing reform to the Compensation Scheme of Last Resort (CSLR) should be dumping the Australian Financial Complaints Authority (AFCA) “but for” approach.

In a statement issued under the auspices of the Joint Associations Working Group (JAWG) the member organisations have sought to strongly emphasise the reform on which they hold unanimous agreement, with the first being “limiting CSLR compensation to capital losses only”.

The statement also nominated:

• enabling the CSLR to deduct relevant offsets from compensation payments, including amounts recovered through external dispute resolution processes, insolvency proceedings, insurance arrangements and other sources of redress;
• expanding the CSLR’s subrogation and recovery rights to improve the prospects of funds being returned to the scheme, helping to reduce the burden ultimately borne by levy-paying entities; and
• Treasury further exploring mechanisms to improve the recovery of unpaid AFCA determinations within corporate groups and related entities. Given the complexity of these issues and the potential interaction with existing corporate and insolvency law frameworks, the JAWG considers that further consultation and targeted policy development is warranted before any reforms are progressed.

The JAWG statement also noted that, “give its role in setting, maintaining and enforcing the regulatory framework, JAWG also believes the Government should share some of the responsibility for funding the foreseeable CSLR levies.

“Finally, while not directly addressed in the consultation package, the JAWG is concerned with the high proportion of CSLR costs attributable to AFCA fees,” it said.

“Based on the CSLR’s FY27 initial estimate, AFCA fees are expected to represent $20m or 15% of the total levy borne by industry. The JAWG encourages Treasury to explore opportunities to improve the efficiency of the external dispute resolution system and identify measures that could reduce unnecessary costs while maintaining access to effective consumer redress.”

The JAWG statement then went on to outline what the associations did not want.

“The JAWG opposes the proposal to introduce mandatory waiting periods when changing superannuation funds. These measures would introduce significant friction, cost and operational complexity into the advice process while doing little to address the underlying causes of the harms identified in recent cases. Indeed, the lead AFCA determinations with respect to Shield and First Guardian show customers were often courted by lead generators over months, and therefore waiting periods would not necessarily have stopped the harm.

“We also envisage unscrupulous operators will simply adjust their sales scripts and tactics to account for a mandatory waiting period.

“The JAWG also strongly opposes the proposal to prohibit advice fee deductions for switching-related advice. Assessing whether a member’s existing superannuation arrangement remains appropriate, having regard to their objectives, financial circumstances and needs is a fundamental component of comprehensive personal financial advice and good consumer outcomes. Measures that effectively discourage advisers from providing switching-related advice risk undermining access to financial advice and limiting consumers’ ability to receive professional guidance on one of their most significant financial assets.

“Financial advisers are already subject to extensive obligations, including the duty to act in the client’s best interests (s961B of the Corporations Act) and provide advice that is appropriate to the client’s circumstances (s961G). Therefore, the JAWG considers that Treasury’s focus should be on identifying and enforcing the law where misconduct has occurred rather than imposing additional process requirements that apply equally to compliant advisers and consumers.

“The JAWG is also concerned about potential negative impacts to member choice and competition under this proposal, both of which are important principles underpinning good consumer outcomes within our system. The proposal would have the effect of reducing access to advice, especially for members who have the least ability to pay for it from non-superannuation savings. There is therefore a risk that members become ‘stuck’ in underperforming funds with poor service or they act on unregulated ‘advice’ to switch to a different fund.”

The JAWG statement also emphasised its unanimity in curbing lead generation activity, noting the associations’ joint opposition to removing or restricting the existing exemption from the hawking prohibition where personal advice is provided.

“Removing or restricting the exemption would introduce friction and legal uncertainty into legitimate advice conversations, potentially discouraging advisers from raising related issues that are relevant to a client’s financial wellbeing. It will also increase compliance costs without addressing the root causes of the misconduct observed in Shield and First Guardian.

“For example, a client may initially seek superannuation advice but then broader needs across insurance, retirement planning or investments are subsequently identified and addressed. Restricting the exemption would interfere with these legitimate interactions and risk placing advisers in tension with their existing obligations.

“As outlined above, financial advisers are already subject to a comprehensive suite of statutory obligations relating to advice delivery, including broader licensee obligations under the Corporations Act. The failures observed in Shield and First Guardian were not the result of a deficiency in the personal advice exemption itself, but rather instances of non-compliance with existing legislative obligations, together with broader issues relating to supervision by the AFS licensee and regulatory enforcement. Therefore, removing or narrowing the exemption would be a disproportionate response that risks limiting access to legitimate financial advice while doing little to prevent the misconduct that Treasury is seeking to address.”

The following organisations make up the JAWG:

• Boutique Financial Planning Principals Association Inc. (BFP)
• Chartered Accountants Australia and New Zealand (CA ANZ)
• CPA Australia
• Financial Advice Association of Australia (FAAA)
• Financial Services Council (FSC)
• Institute of Public Accountants (IPA)
• Licensee Leadership Forum (LLF)
• Self Managed Super Fund Association (SMSFA)
• Stockbrokers and Investment Advisers Association (SIAA)
• The Advisers Association Ltd (TAA)