AFCA workforce stretched as financial advisory complaints surge
The industry-funded Compensation Scheme of Last Resort (CSLR), introduced in 2023 to protect victims of financial misconduct, is facing a severe cost blowout.
The scheme, which places a levy on the financial services industry to fund claims, has seen its annual cost surge from $4.8 million in 2024 to a projected $137.5 million by 2027.
The blowout is largely driven by claims related to failed financial firms including Dixon Advisory, United Global Capital and Brite Advisors. Shield and Guardian complaints have not been factored into the estimate.
“The rate and scale of firm failures aren’t slowing. The number of impacted consumers continues to rise, and the proportionate negative impact caused by a relative few remains significant,” said CSLR chief executive David Berry.
Berry also warned that the levy could rise even further, saying: “Right now, there are too many uncertainties to reliably estimate the potential impact of Shield and First Guardian on the Scheme."
As such, $126.9 million of the 2027 levy will fall on personal financial advisers.
Meanwhile, credit intermediaries (including mortgage brokers) will contribute just $2.2 million, up from the revised 2026 estimate of $1.8 million for 2026.
Credit: CSLR
Since the personal financial advice sub-sector has a levy cap of just $20 million, it raises the prospect that the CSLR will need to seek a special levy to address the massive shortfall.
There are also concerns that the Australian Financial Complaints Authority (AFCA) is struggling to process the volume of complaints it is receiving.
The CSLR said: “Based on our assumed ultimate level of claims (including complaints to be reported in future), we expect that the large financial failures in aggregate generate more complaints that AFCA can process within the FY2026 and FY2027 levy periods.
“Our initial estimate assumes that AFCA’s workforce that makes CSLR-relevant determinations is ‘at-capacity’ up to and throughout FY2027.”
