This report highlights broader worries about rising expenses associated with the Compensation Scheme of Last Resort (CSLR). Concerns also extend to the Australian Securities and Investments Commission (ASIC), whose costs are predicted to almost double by the next financial year, according to the document.
FAAA's general manager of Policy, Advocacy, and Standards, Phil Anderson, described the expected increase in AFCA fees as "huge" and emphasized the lack of clarity from AFCA regarding the reasons behind this development. These projected costs, if confirmed, would present significant financial burdens, particularly for those within the financial advice sector dealing with a range of compensation cases.
The report estimates that AFCA's fees will catapult from $1,978,000 in the current fiscal year to a staggering $13,989,000 by 2026/27. Anderson cautioned that if these increases materialize, they could jeopardize the pre-CSLR total cost, an area of concern for financial advisers already carrying significant fee obligations.
Furthermore, Anderson underscored that legislative changes early in 2023 have placed additional financial pressures on the advice sector, mandating contributions towards costs incurred before the CSLR took effect. For instance, there are currently 1,654 pre-CSLR Dixon Advisory cases, and rising AFCA processing fees could add an unexpected $14.7 million to the financial load.
This situation remains under scrutiny from various industry bodies as they await further official verification and explanation from relevant authorities, including AFCA and ASIC.
