Financial Advice Association Australian has renewed its push for changes to the Compensation Scheme of Last Resort amid a Treasury consultation on ways to improve the system.

A survey of association members found 79% of advisers plan to raise client fees to offset the cost of the CSLR levy and nearly 70% expect a material hit to profitability, with 32% forecasting a major impact of more than 10%.

“In addition, 70% of advisers believe the CSLR levy will result in a reduction in adviser numbers,” the association said.

Association CEO Sarah Abood says the findings highlight a “growing disconnect” between the intent of the compensation scheme and its real-world impact.

“The clear message from advisers is that the CSLR levy will be felt not just by advisers but also by consumers – through higher advice costs and reduced access to advice,” she said.

“The financial advice profession is made up primarily of small and microbusinesses, with just over 15,100 advisers spread across 6073 practices – an average of only 2.5 advisers per practice.

“These small businesses have little ability to absorb large additional costs.”

Treasury launched the consultation last month after the scheme needed a one-off levy of $47.3 million, spread across 23 retail-facing financial services subsectors, to cover a funding deficit this financial year.

Scheme legislation caps a single subsector’s annual levy contribution at $20 million, but there are provisions for a special charge should the need arise.