Devs here! As written, all characters start at base level, even if the previous character was high level or the rest of the party is.
While this is punishing, it's for three design reasons:
1. War should be punishing and death should feel bad in order to keep the stakes high and the players immersed - if players want to do badass things, they need to do smart badass things that give them an unfair advantage against the enemy, like sneaking, sabotage, flanking, etc. FIST is more of an underdog, against-all-odds fantasy than a power fantasy.
2. Character progression tends to be horizontal instead of vertical - all the stat bonuses and items in the traits list are fine-tuned so that while characters may have more tools as they advance, they don't become invincible, and a 6 trait character can work alongside a 2 trait one.
3. Capital and worldly gains are important - loot and gadgets and backup are the name of the game, and a fresh, underleveled character can be "caught up" with everyone else by sharing loot.
Hope this helps and thanks for playing!!
EDIT: Something that might be helpful for setting player expectations is comparing FIST to roguelikes. It's very inspired by these games, where death is bad - you always start from scratch.