Around three-quarters of the CSLR levy for FY26 is expected to relate to compensation for clients of United Global Capital (UGC).
Last week, it was announced that the initial levy estimate for FY26 is $77.9 million to fund an estimated 491 claims, and $70.1 million of this – some 89 per cent – is allocated to the financial advice sector.
Examining the actuary report for the third CSLR levy period, it said the figure is higher this year due to complaints about UGC, which had not failed at the time of the previous levy period, as well as Dixon Advisory.
There were 101 open UGC complaints as of 30 September 2024, and the report said it expects to see a further 240 complaints made by the time UGC’s membership of the Australian Financial Complaints Authority (AFCA) is cancelled on 31 May 2025. The expected average claim size for these complaints is $145,000, higher than the average size for a Dixon Advisory complaint at $121,000.
Levy estimates can vary, however, based on the number of unreported complaints that emerge, the average claim size and the processing speed.
For example, the CSLR expects to see an additional 240 UGC complaints, but its high scenario assumption can see an extra 340 complaints which will cause the levy to rise from $71.4 million to $85.2 million.
Commenting, chief executive of the FAAA Sarah Abood said: “This is an eye-watering figure in only the second year of operation for the CSLR and is substantially in excess of previous estimates. The two largest contributors to the cost, being Dixon Advisory and UGC, are both clearly product failures, and yet it is financial advisers who will pick up the entirety of the bill.
“It is not hyperbole to suggest that a figure of $70 million represents an existential threat for financial advice in this country.”
UGC and the associated Global Capital Property Fund (GCPF) was wound up by the Federal Court in Victoria on 3 October 2024 as its affairs were in an “unsatisfactory state”. Among reasons given for the wind up were a justifiable lack of confidence in the conduct and management of GCPF’s affairs and a risk to the public interest that warrants protection.
GCPF is an unlisted public company, which was incorporated on 15 August 2019, with 538 shareholders, from whom it raised around $85 million in share capital. It was run by directors Joel Hewish, Brett Dickinson and Chris Pappas, although Hewish has since resigned as he received a banning order from ASIC. Hewish was also the sole director of UGC, which had its AFSL cancelled on 31 May 2024.
Its “advice model” involved UGC or its corporate authorised representatives (CARs) making cold calls to consumers for a “superannuation health check”, encouraging them to rollover their superannuation into an SMSF and invest their retirement savings in related-party products.
So we are now underwriting criminal scams?