Search by:NameLocation
 
 

Media

In Brief: July Edition  

Do you have a good advice story?

Are you an adviser with a customer who'd like to tell their story how your advice helped them?

Are you a customer with a good story about how advice has added value to your life?

Tell us about it

Unchecked CLSR will ‘bankrupt everybody’: FAAA

« back to media

19 August 2025 by Chris Dastoor, Professional Planner

Article link: https://www.professionalplanner.com.au/2025/08/unchecked-clsr-will-bankrupt-everybody-faaa/

The Financial Advice Association Australia believes the current consultation on the Compensation Scheme of Last Resort special levy will set a precedent on how special levies will be funded in the future and should be spread as widely as possible.

A consultation to fund the special levy was triggered after Minister for Financial Services Daniel Mulino was notified in July, as required by law, that the estimated claims cost related to personal advice for FY26 would exceed the $20 million subsector cap, coming in at $67.3 million.

“We think that for this levy, we’re setting a precedent, and we think it’s important for people to have an expectation about what’s going to happen in the future as well as what is going to happen this year,” Abood said during a member webinar on Tuesday.

“We don’t believe our sector can withstand any more than the subsector cap that currently exists. It’s already $20 million, it’s already too high for us.”

Abood and the association have called for those responsible for failed schemes to be held accountable, pointing to Dixon Advisory and Libertas as examples of parent companies that circumvented liability by taking advantage of legal loopholes.

“It’s so important to not just see this consultation on the special levy as somehow fixing the problem,” Abood said.

“It just really just is a band-aid, we have to fix the problem long term. If we continue to encourage bad behaviour in the financial advice sector, eventually we’re going to bankrupt everybody and that’s certainly not going to help consumers.”

As part of the consultation, the government will consider levying other subsectors to fund the excess, despite pushback from the broader finance sector in a previous consultation last year.

The association’s view is that none of a potential additional levy should be imposed on the advice sector.

“With that caveat, our view is that additional amount should be spread as widely as possible across all the firms and sectors that are subject to being members of AFCA and that is based on affordability [and] capacity to pay for the sector,” Abood says.

“The CSLR makes no attempt to attribute blame to any particular player. We already know that the advisers who paid a levy are not the ones who did the wrong thing. I don’t think there’s any future in trying to attribute blame in this year or any future year.”

The FY27 levy is expected to surpass $120 million and the collapse of the Shield and First Guardian Master Funds has yet to be factored into future projections.

Although the collapse of both funds was due to ASIC intervention over concerns of conflicts of interest and mislabelled high-risk investments, advisers were still the driving force getting clients into the products.

“One of the things I find extraordinary is how few advisers were involved,” Abood says.

“There’s only five financial advice firms – at least so far – that ASIC has identified as being involved with these. A single adviser, called Ferras Merhi, is personally responsible for over 8000 of the investors who put money into those schemes.”

The latest Adviser Ratings advice landscape report found the average number of clients per adviser is 131 and this mathematical discrepancy wasn’t lost on Abood.

“I find that alone extraordinary and I find it hard to understand how that was possible, how it wasn’t picked up earlier,” Abood says.

Merhi has been targeted as a key player in the scheme and the Federal Court has frozen his assets and imposed further travel restrictions on the adviser.

Abood – who has previously been critical of mainstream news reporting on the issue – reiterated it was advisers that blew the whistle on the scheme with reports being sent to ASIC in 2023.

ASIC announced on 7 February 2024 it had stopped the Shield fund from being offered to clients.

“Those reports came from advisers and by and large they were our members who’d see advice that had a client come to them for a second opinion,” Abood said.

“They’ve seen the advice and gone ‘what the hell, this is appalling advice’.” They’ve called us and we’ve collectively reported that to ASIC.”

Platforms have since turned off advice fees to clients in the Shield and First Guardian funds and licensee Infocus has been one of the groups helping those clients by offering new advice arrangements.

Abood said many of the association’s members are also helping clients.

“We’re dealing with a number of advisers and supporting them in the work they’re doing to engage with consumers,” Abood said.

“These advisers are helping advisers with their complaints to AFCA, ensuring they get the complaint at the right entity.”

Comments

No comments added.

Add comment

Name

Email

Comments

Enter code:*

Refresh code

Add comment

« back to media

Adviser Ratings

For consumers

For advisers

 
  Join as an Adviser
 

While we may facilitate the review and introduction of Advisers, Customers of Adviser Ratings will be responsible for entering into their own agreement with Advisers introduced through our website. Adviser Ratings does not provide personal financial advice nor do we recommend or suggest a particular adviser is right for you. We provide information of a general nature and we do not take into consideration your personal objectives, financial situation or needs. Always consider whether the advice and information you are provided suits your needs. Adviser Ratings does not endorse, accept or adopt the Advisers on our site, the content of any profiles or the comments or discussion in any community forums. For further information about How We Rate Our Advisers, click here. Per quote in our video, refer KPMG research undertaken for Financial Services Council

Adviser Ratings Pty Ltd (ABN 18 154 273 640 ) is a Sydney based company located at Level 22, Tower 3, 300 Barangaroo Avenue, Sydney, Barangaroo 2000, Australia

© 2021 Adviser Ratings Pty LtdTerms of Use | Privacy | Contact