AFCA ends Dixon Advisory membership

The board of the Australian Financial Complaints Authority (AFCA) has advised the administrators of Dixon Advisory & Superannuation Services (subject to Deed of Company Arrangement) that it intends to expel Dixon Advisory from membership of the AFCA external dispute resolution scheme.

The administrators have 21 days to make any submissions regarding the notice of expulsion.

Pending board consideration of any submissions, AFCA said it expects the expulsion would take effect on and from 30 June 2024.

The decision to give notice of expulsion was made by the AFCA board at the first board meeting to follow the end of Dixon’s mandatory membership of the AFCA scheme.

In cancelling Dixon Advisory’s Australian Financial Services Licence (AFSL) in April 2023, the Australian Securities and Investments Commission (ASIC) had required it to remain an AFCA scheme member until at least 8 April 2024. That requirement has now expired.

Under AFCA’s Constitution, proposed membership expulsions must go before the AFCA board for consideration and decision.

The AFCA board will consider any submissions made by Dixon Advisory at its next board meeting on 20 June 2024, before making its final decision.

AFCA can only accept complaints about firms that are current members of the AFCA scheme. Once an AFCA member is expelled, AFCA cannot accept any new complaints against that former member.

FAAA welcomes end to Dixon membership

The Financial Advice Association Australia (FAAA) has welcomed AFCA’s decision to end the membership of Dixon Advisory, with CEO Sarah Abood calling it a fair and sensible decision, following months of relentless FAAA advocacy.

AFCA’s position was confirmed in a letter from AFCA chair Professor John Pollaers to FAAA chair David Sharpe, responding to concerns the FAAA had raised with AFCA about Dixons’ continued membership.

“The FAAA has been calling for Dixons’ membership of AFCA to be ended for some time. It has been extended twice, despite the fact the company went into administration in January 2022,” Abood said.

“This meant that complaints by former clients could continue to be made and would continue to be eligible for compensation from the Compensation Scheme of Last Resort (CSLR), considerably increasing the potential cost of the scheme to financial advisers well beyond the actuarial estimates.”

“Ending the membership of Dixons as proposed, effective on 30 June 2024, represents an appropriate and fair outcome for consumers, providing them with ample time to lodge a claim, as well as recognising that the profession is funding the compensation.”

She said the FAAA is still calling on the government to take further action as there is considerable work to be done to ensure the funding model is sustainable.

“The FAAA supports the CSLR in principle, however a number of substantial problems remain with the way the scheme has been funded, which threaten its long-term viability,” Abood said.

“The burden should not fall on financial advisers who have done nothing wrong. It is economically impossible for the small business financial advice sector to underwrite the failures of large listed firms.

“The CSLR has created a situation where companies can simply walk away from a failed subsidiary, leaving the rest of the sector to compensate clients. This is a dangerous precedent and removes the consequences of poor or risk-taking decision making.

“It is disappointing that Minister Jones has not yet responded to the concerns the FAAA has been expressing on behalf of members since before the scheme launched, regarding the size and scope of the CSLR, and the unsustainable nature of its funding.

“Without changes to the funding model, the scheme is likely to further increase the cost of advice – through advisers either passing additional costs through to clients, or leaving the profession as a result of increased costs - further exacerbating the current demand/supply imbalance, and increasing the costs of those who remain, in a vicious cycle.

“We share a common goal with the government; to make high quality financial advice more affordable and accessible for consumers. The CSLR is one of the biggest threats to this goal and we will continue our campaign to ensure the scheme is set on a sustainable footing.”