Treasury's emergency consultation on a Compensation Scheme of Last Resort (CSLR) special levy arrives at a particularly sensitive moment for Australia's financial advice profession. With the scheme facing a $47 million funding shortfall, attributed mainly to the Dixon Advisory collapse, current advisers face the prospect of covering losses from firms that ceased operating years ago. This proposal appears to test the resilience of an industry that has only recently stabilised after unprecedented disruption.
A Profession Finding Its Footing
The 2025 Australian Financial Advice Landscape Report reveals an industry in careful recovery. After the profession shed more than 12,000 advisers between 2018 and 2022, dropping from 27,953 to 15,475 practitioners, the haemorrhaging has finally ceased. Perhaps more significantly, adviser sentiment has shifted markedly. Only 10.4% now indicate plans to leave the profession, a substantial decrease from 26% in 2021.
These figures suggest more than statistical stabilisation. They reflect years of difficult adaptation as practices navigated post-Royal Commission requirements, met new education standards, and fundamentally restructured their operations. The profession that has emerged appears more compliant and client-focused, though arguably more vulnerable than surface metrics might indicate.
The headline stability masks concerning variations in practice health. While 83% of practices report revenue growth and 51% achieve profit margins exceeding 20%, a substantial minority remains financially precarious. Fourteen per cent of practices generate no profit whatsoever. Another 10% operate on margins below 10%. Solo adviser practices, representing 32% of practices, face particular challenges, with 19% reporting zero profitability. These figures suggest a profession where success remains unevenly distributed.
Questionable Timing for Additional Burdens
Treasury's consultation proposes three mechanisms for recovering the CSLR's $47 million shortfall: equal distribution across all financial services sub-sectors, proportional allocation based on sub-sector size, or targeted levies on sectors generating the most claims. Either way, this is on top of the $20 million the advice sector will already bear, and each approach would require today's compliant advisers to subsidise even more for failures that predate current regulatory frameworks.
The timing is also particularly challenging. Median advice fees increased 18% in 2025 alone, reaching $4,668, representing a 67% rise over five years that significantly exceeds the 20.5% inflation rate for the same period. This fee growth appears to reflect necessity rather than opportunism, as practices absorb mounting compliance costs, technology investments, and professional indemnity premiums that have increased substantially following insurer exits from the market.
The Dixon Advisory situation exemplifies the disconnect between past failures and current practice. The firm's promotion of its own property fund, which ultimately generated significant client losses, represents precisely the type of conflicted model that recent reforms sought to eliminate. Current practitioners, operating under strict best interest duties, the code of ethics and comprehensive disclosure requirements, had no involvement in these historical failures.
The First of Many Levies
Perhaps most concerning is that this $47 million levy represents merely the beginning. The current shortfall doesn't encompass all Dixon Advisory determinations still working through the system. More significantly, it includes none of the Shield Master Fund or First Guardian Capital cases, which haven’t yet been heard by AFCA, and are therefore expected to flow through to the CSLR in the coming years.
This suggests the profession and broader industry face not a single exceptional charge but potentially a series of levies as historical failures continue surfacing. Shield Master Fund's collapse and First Guardian Capital's failure represent additional waves of claims that are going to require funding. The cumulative impact of multiple levies could prove far more damaging than any single charge, particularly for practices already operating on marginal economics.
The uncertainty itself creates planning challenges. How can practices budget for unknown future levies? What contingencies should they maintain? This unpredictability makes business planning more difficult and might deter potential practice buyers or new entrants who cannot accurately assess future liabilities.
Uneven Impact Across the Profession
The levy's burden would likely fall disproportionately on smaller practices. Larger firms with diverse revenue streams might absorb additional costs, though perhaps reluctantly. However, smaller operations, particularly solo practices already operating at breakeven, could find even modest levies financially devastating.
Consider a typical solo adviser practice generating $606,660 in annual revenue, the average according to AFLR 2025 data. For those already operating on thin margins, an additional levy of $5,000 to $10,000 could potentially eliminate profitability entirely. Regional practices and those serving lower-wealth clients, where fee increases prove challenging to implement, would face particular pressure.
The profession's structural evolution compounds these challenges. With 78% of advisers now operating under privately owned licensees, many small operations with limited reserves, there's reduced institutional capacity to absorb unexpected costs. The major banks and diversified institutions that might once have cushioned such industry-wide charges have largely exited the advice sector, leaving individual practices more exposed.
Questions of Equity and Precedent
Beyond immediate financial considerations, the levy raises questions about fairness that could affect professional morale. Today's advisers have invested considerably in education, compliance systems, and meeting professional standards. Requiring them to fund compensation for failures under previous regulatory regimes seems to create a troubling precedent.
This cross-subsidisation model might inadvertently undermine the incentive structures that regulatory reform aimed to establish. If compliant practitioners must repeatedly cover losses from non-compliant firms, this could potentially weaken the business case for maintaining high standards. Why invest substantially in compliance and professional development if the profession collectively bears liability for those who don't?
The psychological impact shouldn't be underestimated. The improvement in retention intentions, from 26% planning departure to 10.4%, likely reflects not just financial stability but renewed confidence in the profession's direction. Additional regulatory burdens perceived as arbitrary could potentially reverse this sentiment, risking another wave of exits just as stability emerges.
Implications for the Professions Renewal
The profession has recently shown signs of renewal, with 484 new entrants in 2024, representing a 25% increase from 2023. While modest, this growth suggests the beginning of generational renewal. However, prospective advisers might reconsider entering a profession where compliance and professionalism seemingly result in liability for predecessor firms' failures.
The broader implications for consumer access deserve consideration. With only 10.4% of Australians currently receiving professional financial advice, despite increasing complexity in retirement planning and wealth management, any reduction in adviser numbers or increase in service costs directly affects accessibility. The profession cannot simultaneously address the advice gap while absorbing unlimited liability for historical failures.
The cumulative effect of regulatory costs threatens to create a vicious cycle. Higher costs drive fee increases, which reduce accessibility, which limits practice growth, which makes fixed costs harder to bear. Adding unexpected levies to this equation could accelerate a dynamic that ultimately serves nobody's interests.
Policy Coherence and Priorities
Assistant Treasury Minister Daniel Mulino has identified advice reform as a "top two or three priority" for the government. Yet the CSLR levy consultation seems to work against the stated objectives of improving advice accessibility and affordability. While implementation of Quality of Advice Review recommendations that might reduce compliance burdens remains delayed, the government contemplates new costs that would increase practice pressures.
This apparent disconnect between policy intention and practical implementation suggests a need for more coordinated thinking about the cumulative regulatory burden on the profession. Each measure might seem justified in isolation. Collectively, they risk overwhelming an industry still recovering from massive structural change.
The data indicates a profession that has successfully navigated extraordinary disruption. Practice profitability is gradually improving, technology adoption is accelerating, and adviser confidence has returned. Yet this recovery appears more fragile than robust, built on foundations that additional regulatory burdens could destabilise.
Alternative Approaches Worth Considering
The CSLR serves an important consumer protection function that the profession broadly supports. However, the funding mechanism for historical failures warrants careful consideration to avoid jeopardising the industry's future. Several alternatives might better balance consumer protection with industry sustainability.
Government funding for claims arising from pre-reform failures would acknowledge the fundamental changes in regulatory standards. Extended payment periods could allow the industry to absorb costs gradually without threatening immediate viability. Exemptions or reduced levies for smaller practices operating on minimal margins might prevent the loss of advisers serving regional or lower-wealth markets.
Treasury's consultation provides an opportunity to consider creative solutions rather than defaulting to simple cost distribution. The challenge lies in finding approaches that maintain consumer protection without undermining the profession's capacity to deliver advice.
Looking Forward
The 2025 data presents a narrative of resilience and adaptation, but also continuing vulnerability. A profession that lost nearly half its practitioners over six years cannot reasonably be treated as an unlimited funding source for regulatory schemes. The advisers who remained, who invested in education and compliance, who rebuilt practices for long-term sustainability, these professionals warrant policies that recognise their commitment rather than penalise their persistence.
As Treasury evaluates options, it might consider not just immediate funding needs but longer-term implications for access to advice. A levy that drives advisers from the profession or deters new entrants ultimately disadvantages the consumers it aims to protect. The challenge involves finding solutions that maintain protection without destroying the mechanism for delivering it.
With $3.5 trillion in intergenerational wealth transfer approaching and increasing complexity in retirement planning, Australia needs a thriving advice profession. Policies that support this profession's development serve broader economic and social objectives. Those that destabilise it, regardless of intention, risk creating advice deserts that harm all Australians, particularly those who need professional guidance most.
The CSLR levy consultation represents more than a technical funding question. It tests whether policymakers recognise and value the transformation the advice profession has undergone. The response will likely influence not just adviser sentiment but the accessibility and affordability of professional financial advice for years ahead. After everything the profession has endured and achieved, getting this balance right seems not just important, but essential.
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Comments9
"What are our industry representative and advocacy groups doing?! The mortgage brokers associations were able to quickly and successfully quash the proposal to remove ongoing loan commissions a few years back!"
Frustrated and Angry! 18:16 on 07 Aug 25
"Everyone seems intent on not being confrontational, with no one prepared to state the obvious - we have a government determined to destroy the financial advisory industry. "
Mark 20:16 on 06 Aug 25
"There is plenty of commentary about there, especially from the FAAA, along the lines of "we agree with the CSLR but....". Why would you agree to compensate the professional negligence of others? Name another profession or industry that does that? But my hopes of anything changing is low. This government, through their industry fund/union entwinement, aren't interested in helping us. They see us as a threat, so any talk about fixing this is just lip service. Soon there will be a new class of adviser who doesn't have to comply to our standards or pay our levies. It's hard to stay positive - it's all very draining."
Tired 16:36 on 06 Aug 25
"It somehow seems it pays to be a Scammer rather than an Advisor!!! Maybe we as advisors should change occupations become scammers pay no levies fees at all siphon $200 plus million overseas and then retire to the BAHAMAS!! Sound like a perfect financial plan to me?? Does anyone else agree?"
Scammer 16:32 on 06 Aug 25
"The CSLR seems to be based on the lowest common denominator, penalising compliant hard working progressive practices for other non-compliant fraudsters. Isn’t good government about encouraging progressive companies and industries to aid a better economy? Perhaps politicians responsible for disastrous budgets blowouts, should start coughing up from their big fat indexed guaranteed taxpayer funded pensions! "
Disillusioned 16:24 on 06 Aug 25
"If Australia was run by ASIC: all criminals would go free and every citizen would spend a week in prison to 'share the blame' for their crimes. Great system."
Apathetic 15:40 on 06 Aug 25
"I'm happy to pay - after every director and adviser involved with the scheme has been liquidated, and their professional indemnity insurer has paid the maximum benefit per claim."
Frank G 15:39 on 06 Aug 25
"Horrible!!!!! Can't wait to get out of this industry. "
Disgusted 15:29 on 06 Aug 25
"what junk mail is this. we have to pay for indemnity insurance and then pay for companies that don't insure against their neglegence. What crap is this"
Concerned Bull dung 15:21 on 06 Aug 25