Following the Australian Financial Complaints Authority (AFCA) last week announcing that Dixon Advisory’s membership will be terminated from 30 June 2024, the SMSF Association has urged the federal government to take definitive action on Dixon compensation claims.
SMSF Association chief executive Peter Burgess said last week’s announcement by the AFCA draws a line under the Dixon complaints that could potentially be funded by the Compensation Scheme of Last Resort (CSLR).
“While we welcome this announcement, the cost of Dixon’s compensation claims lodged before the end of the financial year but paid after, could still amount to many millions of dollars that ultimately will need to be paid for by the advice profession,” Burgess said.
“We think there is a perfect opportunity now for the government to step in and, like the AFCA, draw a line under the advice industry’s financial responsibility by agreeing to cover all unpaid Dixon compensation claims.”
The SMSF Association noted that despite the government initially planning to cover the first year of the CSLR, this has been reduced to a mere three months.
Combined with the “slow progress” of the processing of complaints, there will be just one Dixon compensation case funded by the government.
“We are urging the government to show their support for the financial advice profession and agree to this simple request,” Burgess added.
The SMSF Association has also thrown its weight behind a review of the scheme’s funding model, labelling it “unsustainable and untenable”.
“We support the CSLR in principle but expecting small advice firms to pick up the tab for the failures of a large advice firm, which is a subsidiary of an ASX-listed company, is both inequitable and contrary to the government’s stated policy of making accessibility and affordability of advice a priority,” Burgess said.
“Further, the exclusion of managed investment schemes from the CSLR’s funding model risks pushing more costs on to the advice professions and driving more advisers out of the system at time when they are needed most.”
Last week, Financial Advice Association Australia (FAAA) CEO Sarah Abood told ifa that ending Dixon’s membership of AFCA is just one of the “many issues” the FAAA has with how the scheme has been handled, including the role of Dixon parent company Evans and Partners (E&P).
“When this compensation is paid, much of it will go to E&P as they still have many of these clients on the books,” Abood said.
“It’s certainly what makes me the angriest, that advisers are on the hook for the failings of a listed entity.
“It’s unbelievable.”
She explained that by not including managed investment schemes (MISs) in the CSLR, “every failure becomes an advice failure”.
“I’m worried about what that will do to the reputation of advice. It’s critical that MISs are in the scope,” Abood said.
“There are implications for consumers as well, and how advisers will respond. Some advisers may say this is the straw that breaks the camel’s back and they end up leaving. The more advisers that leave, the more it will cost those that remain.
“If it isn’t dealt with, then there will be nobody left.”
Federal ICAC should have a look at this one. No directors held accountable, no advisers accountable, parent company not accountable and all the rest of us on the hook for potentially $5,000+ each. Utter sham. Industry bodies need to go as hard as concrete on this matter.