E&P appointed 39 former Dixon advisers: ASIC

Responding to questions on notice from Liberal senator Andrew Bragg, the Australian Securities and Investments Commission (ASIC) has detailed how many clients and advisers moved from the defunct Dixon Advisory to parent company Evans and Partners (E&P).

The written questions, which the senator has directed to ASIC as part of budget estimates, included inquiries into the transition of former clients of Dixon Advisory to E&P.

“How many of these Dixon Advisory clients moved to other subsidiaries within E&P Financial Group and how many of these clients who moved have submitted complaints to AFCA, which will need to be paid for by the CSLR?” Bragg asked.

“Additionally, how many financial advisers transferred from Dixon Advisory to Evans and Partners?”

In response, ASIC said that about 3,280 of the 4,100 Dixon Advisory & Superannuation Services (DASS) clients had, by May 2022, moved to E&P.

“Every DASS client was given a choice, with some choosing to leave and the majority deciding to stay withing (sic) the group,” ASIC said.

“Most DASS clients already had a standing relationship with other entities within the group. For instance, clients may have received investment advice from DASS, but the administration of their self-managed superannuation fund was conducted by other entities, or they received broking services from another of the AFSL holders within the group.”

However, ASIC said it had no knowledge of how many Dixon clients that are now with E&P had lodged AFCA claims, “nor do we have visibility of how many may ultimately result in claims being made under the Compensation Scheme of Last Resort”.

Speaking with ifa in May, Financial Advice Association Australia (FAAA) chief executive Sarah Abood raised concerns around the role of Dixon parent company Evans and Partners (E&P), including that it would indeed be a beneficiary of CSLR payments.

“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 told ifa.

“It’s certainly what makes me the angriest, that advisers are on the hook for the failings of a listed entity. It’s unbelievable.”

On the issue of Dixon advisers, the regulator explained that between 1 January 2021 and 10 May 2022, E&P appointed 39 advisers who were Dixon representatives.

“Of those, 27 were appointed to an E&P role that involved the provision of financial advice,” ASIC said.

“Some of the advisers were appointed to E&P well before DASS entered administration on 19 January 2022. Since at least 2000, E&P Financial Group Limited (EP1) have made public disclosures about its plans to consolidate the wealth management group, which consisted of several entities that provided financial services (including DASS).”

‘Most’ misconduct reports after ASIC investigation began

Despite Bragg relaying that the sentiment among financial advisers was that the problems with Dixon Advisory “have been known for many years and had been reported to ASIC”, the regulator said the majority of the misconduct reports it received came after it had commenced its “first investigation”.

“Between October 2008 and September 2022, ASIC received 60 reports of misconduct in relation to DASS,” it said.

“As set out in ASIC’s prior response in Set 73, most reports were received 2019 or later, being after ASIC had commenced its first investigation.

“The earlier reports resulted in ASIC conducting surveillances or were subject to no further action. One such surveillance subsequently led to the commencement of an investigation in July 2019 relating to suspected breaches of best interest duties and conflict of interest.”

The regulator also addressed its decision to extend Dixon’s AFCA membership a year to 8 April 2024, which increased the amount of time available for affected clients to lodge complaints with AFCA.

“ASIC may, as occurred in this case, impose conditions as part of administrative decisions. In the context of a licence suspension or cancellation, this can include a condition to maintain AFCA membership (although the decision to expel or cancel a licensee’s AFCA membership is a matter for AFCA),” it said.

“We have imposed such conditions on regular occasion – including in the case of DASS for a further year after its license cancellation – to preserve the rights of clients to make claims to AFCA.

“This is because complaints can only be made against entities which are AFCA members; if an entity’s AFCA membership ceases, no further complaints can be accepted by AFCA.”

Following the eventual expulsion of Dixon from the AFCA scheme, the authority detailed that it had registered 2,773 complaints against Dixon Advisory.