Levy boycott would cost advisers an extra 20%

The drastically escalating costs of the Compensation Scheme of Last Resort (CSLR), particularly as it relates to the costs of the Dixon Advisory collapse, has seen some advisers calling for a boycott of the scheme altogether.

Despite this, the amount that the advice profession is on the hook for has continued to climb, even as the Australian Financial Complaints Authority (AFCA) seeks to put a definitive end date for Dixon’s membership at 30 June 2024.

This was followed by the complaints authority providing an update to Senate estimates that bumped the losses from the collapse to $458 million.

Speaking at ifa’s Adviser Innovation Summit in Melbourne on Thursday, Financial Advice Association Australia (FAAA) general manager policy, advocacy and standards, Phil Anderson explained just how extreme the impact of the Dixon collapse is.

“On Tuesday, AFCA was in front of Senate estimates explaining the scale of complaints – 2,510 complaints had been received with respect to Dixon Advisory,” Anderson said.

“Please keep in mind that in any year, AFCA receives about 500 advice complaints. One entity has delivered five years’ worth of complaints for the entire profession. This is a debacle of huge scale.”

Based on the latest figures from AFCA, advisers currently need to pay for 871 complaints related to Dixon, which based on the actuaries report estimate of $120,000 per complaint would come to $104 million. However this could grow ahead of the 30 June deadline.

“If we got another 200 complaints came through in the period between now and then, we could be looking at a total of 1,071 that the advice profession has to pay for. At $120,000 each that could be $128 million,” Anderson explained.

However, he reiterated that the FAAA would not support a boycott because of the negative impact it could have on advisers’ businesses.

“I have looked at this and I have checked, the interest rate is 20 per cent,” Anderson said at the summit, which was met with concerned groans from the audience.

“Ultimately, the government will get you. I do not encourage you to put yourself in a position where you can leave yourself exposed to ASIC taking action against you and ultimately paying a 20 per cent interest penalty on it.”