CSLR becomes advisers’ top election headache

As pre-election campaigning ramps up, advisers and their associations have increased the pressure on both sides of Parliament to solve the Compensation Scheme of Last Resort (CSLR) disaster before it cripples the advice profession.

Addressing this at Momentum Media’s Election 2025 breakfast event in Sydney earlier this month, shadow treasurer Angus Taylor said the Coalition would “fix the CSLR’s costs, making it fair and sustainable” while recognising the significant impact it has had on the advice industry.

Shadow financial services minister Luke Howarth, however, took a more aggressive stance, saying, “I don’t even believe in the CSLR … I think the whole thing’s stupid. It’s ridiculous.”

While some have suggested expanding the scheme so more industries are on the hook for the cost – namely the Financial Advice Association Australia (FAAA) which has been pushing for managed investment schemes to be included – Howarth said at the event that the Coalition doesn’t want to expand it, “we want to get rid of it”.

Moreover, in the days since, the Coalition has doubled down on its commitment, most recently pledging to reinstate the $10 million annual subsector cap, exclude ‘but for’ compensation for hypothetical capital gains, and refrain from issuing any ‘special’ levies for this year.

On the other side of government, while outgoing Financial Services Minister Stephen Jones recognised that the CSLR is flawed, he was adamant that “no Parliament” in “no universe” would scrap the CSLR entirely.

“I know a lot of people want a quick fix. I wish there was one … I think we do need to go back and have a look at it,” Jones said at Election 2025.

However, ifa’s latest poll would suggest the CSLR is the most burning issue for the advice profession.

Asked what their top priority is heading into the federal election, 38.5 per cent of 205 advisers that participated in the poll said “Fixing the Compensation Scheme of Last Resort (CSLR)”, closely followed by “Finalising the Delivering Better Financial Outcomes (DBFO) reforms” (36.1 per cent).

Discussions surrounding both concerns have, unsurprisingly, ramped up considerably as the election grows nearer, though the DBFO appears to have triggered a race between the opposing sides of Parliament.

In Taylor’s post-budget address at the National Press Club earlier this month, he promised to introduce legislation to finalise financial services reforms within 100 days if the Coalition is successful at the upcoming election.

Reiterating this at Momentum Media’s Sydney event, Taylor said, “We know there are things to be worked through … We will push through this legislation quickly, it needs to be sorted out.”

Meanwhile, Jones argued that if Australia had four-year terms, he would have finally put a full stop on the DBFO.

“I think six more months, actually, we’d have this particular project and a couple more complete.”

Although he did manage to push out DBFO 1.5 shortly before the election was called, many within the profession believe it is too little too late, with some arguing that very little was actually delivered in the draft legislation. Others have argued that important aspects were left out, deepening advisers’ ongoing disappointment with the government.

Also revealed as part of ifa’s poll, another key issue for advisers are risk advice commissions (20.6 per cent) – following the implementation of the Life Insurance Framework (LIF) in 2018 that capped new business commissions at 66 per cent and trail commissions at 22 per cent.

Discussing this at an AIOFP dinner in Canberra late last year, Howarth declared that it is “time to look at the life insurance framework commission caps”, however, he said that “Jones has made it really clear that it isn’t even on his radar”.

Taylor reaffirmed the Coalition’s commitment to reviewing risk commissions at the Sydney event, arguing that Australia has fallen out of line with local standards of life insurance.

“I heard Stephen [Jones] say that Labor will not do that. We will… We are seeing an insurance industry that is going backwards at a time when Australians need to be insured,” Taylor said.