The Australian Financial Complaints Authority (AFCA) published an update linking the cost pressures around the Compensation Scheme of Last Resort (CSLR) to flawed business models that generate consumer complaints, with conflicted advice models and inappropriate use of self-managed super funds (SMSFs) cited as the most prevalent underlying issues behind complaints that may flow through to CSLR claims. AFCA reported that in 2024 one in five investments and advice complaints it received alleged a failure by the adviser to act in the client’s best interests or to provide appropriate advice. It highlighted recurring patterns including product recommendations driven by incentives, SMSFs being recommended primarily to direct client funds into in-house or high-risk products rather than based on suitability, and an increasing number of complaints linked to cold-calling tactics where consumers are pushed by unlicensed representatives towards SMSFs and specific investments before an adviser formalises the transaction. AFCA also pointed to diversification failures, citing complaints where 50, 60, 70 or even 100 per cent of a client’s funds were concentrated in a single investment, including unlisted or high-risk schemes, and noted that adviser liability arises where a product failure is preceded by flawed advice.

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