While the government will cover the establishment costs for the compensation scheme of last resort (CSLR) and the expenses of the initial levy period until the end of the 2023–24 financial year, subsequent funding will rely on levies imposed on specific segments of the financial services industry.
The CSLR operator holds the key to levy amounts, but potential overrides of the legislated sub-sector cap of $20 million through ministerial determinations are permitted.
Last week, in response to the potential increase in levies charged to advisers as a result of the CSLR, the chief executive of the Financial Advice Association Australia (FAAA), Sarah Abood, said that while the body doesn’t oppose the scheme, it is concerned about past costs and the history of misdeeds in the sector, including those inflicted by Dixon Advisory.
“What is the CSLR going to do with a large number of complaints, for example, from Dixon? We are looking into who is going to pay for those,” Ms Abood said.
Dixon Advisory is fuelling concerns because nearly 2,000 former clients are seeking recourse under the CSLR, which is set to offer capped payments of up to $150,000 from April next year.
Earlier this month, David Locke, the chief executive of the Australian Financial Complaints Authority (AFCA), informed the Senate economics references committee that the total payout for all Dixon complaints would amount to $357 million.
Similarly, the administrators of Dixon Advisory have estimated that losses could reach $360 million.
Despite CSLR regulations requiring Australia’s top banking and insurance firms to pay a one-time levy to tackle the backlog of unpaid claims from AFCA complaints between 1 November 2018 and 7 September 2022 – which includes those made by Dixon’s wronged clients – the expected Dixon-related losses far exceed the $250 million cap mandated by the legislation for this levy period.
Additionally, any complaints filed on or after 8 September 2022, and not resolved by 30 June 2024, will be charged to the sub-sectors, which includes the financial advice profession.
Ms Abood acknowledged last week that while there is an intent from the government to “raise funding from the big 10” and the government itself will pay for complaints within a certain period, the FAAA is “watching very closely what’s left after that”.
“That will be a concern for us,” Ms Abood said.
“We want to make sure that we’re trying to achieve lower costs for advisers, which is an important part of achieving lower costs for consumers,” she noted.
“We’re doing a bunch of sums right now to work out what the potential impact is.”
The FAAA, in conjunction with other member bodies in the advice profession, has long argued that ASIC’s levy on the sector imposes an excessive financial burden on advisers. Now, with the impending CSLR costs, these concerns are reaching new heights.
Earlier this month, the corporate regulator revealed that the total cost attributed to the advice sector for the 2022–23 financial year is estimated at $47.6 million. Based on this data, the FAAA calculated that advisers will incur a final charge of $2,818 per adviser, in addition to the minimum levy of $1,500.
From discussing the proposed CSLR with numerous colleagues and associates, I can assure you it’s much more than a ‘mounting concern’. This is an election deal breaker and forces are combining as I write this to have MP Jones either can and bin both the CSLR and the ASIC Levy, or he and his Labor Party will be out of a job come next election. We have all had enough of being treated like fools and taken as a legislative play tool, that have been belted and had our businesses turned on their head for the last 20 years. Enough is enough. If Labor and Jones are too ignorant or arrogant to take notice of the rage and frustrated feelings out in Adviser Land, they will find out the harsh truth just like Scomo did. We are the only Industry group that has been attacked by all of the political parties over the last 20 years – Mortgage Brokers, Accountants, Real Estate Agents, Lawyers, Conveyancers and all other Professionals that operate alongside us have remain unscathed and protected whilst the Government have not backed off 1 Iota in that same timeline. Enough.
….and the former ‘advisers’, management & directors of Dixon’s pay how much? The glory days of bank management walking away from their ‘fees for no service’ mess are well & truly over. Time to hold those responsible financially accountable.
Advisers also warned ASIC and were ignored about Dixons. I have said it before. There will be a swell of continued exits once the already unfair and bloated ASIC Levy spirals with the CSOLR. Disgusting predictable and they’ll say “unintended” but ENTIRELY OBVIOUS knife the the heart of the profession. Unlike Mortgage Broking where individual and small brokerages thrive, advice will be institutions super funds and boutiques who have reduced risk by hiking fees to flog their back ended mdas or sausage factory advice. Internationally we are such a pathetic country for Financial Advice.
I just hope that a Teal runs in my electorate next time.
What have they done to help? Will end up preferencing ALP anyway?
Get real MP Jones, this is just another nail in the coffin for Professional Advisers. Time to vote them out next election and give someone else a go at fixing the “hot mess”.
Blind Freddy can see that AFCA will process about 10 Dixons Dodgy MIS complaint files from CSLR opening April 2024 until 30 June 2024. So the big insto’s will pay about $1.5 Mill for the Dixon’s fraud.
Advisers will then be forced to pick up the remaining 1,990 complaints = $355.5 Mill / 16,000 Adviser will be left with a Dodgy Dixon CSLR bill of over $22,000 PER ADVISER.
[b]ADVISERS MUST REVOLT AND REFUSE TO PAY CSLR. [/b]
[b]ADVISERS MUST REVOLT AND REFUSE TO PAY ASIC LEVIES. [/b]
Let’s force ASIC and Government to attempt to shut the whole Advice industry down.
Enough is well beyond Enough !!!!!!!!!!!
Agree 100%, enough is enough. Time for talk is well past and done with. Lobbied and watched all of the QAR submissions, waited over 18 months listening to all of the pre-Election promises, spin, and followed by numerous extended delays etc. Advisers are continuing to be treated as a contemptuous joke and held to ransom. No more. Time for action.
If it’s not obvious by now, Professional Advisers will be footing the bill for others’ failures indefinitely, as Govt. Ministers have zero interest in taking responsibility and fixing the Advice Industry’s appalling, unfair and spiraling costs.
It still flummoxes me as to why advisers have to foot the bill on Dixon’s advisory when ASIC was drunk at the wheel and allowed it to happen with no oversight.
Then to add insult to injury ASIC have the hide to push clients into the new scheme.
The organisation is rotten to the core.
Totally agree. ASIC should be held culpable for the Dixon circus. We need a RC into this debacle but will never get one.
What a great system! Chase all the bad eggs out of the industry, then impose the cost of the clean-up on the ethical players that have stuck around. If the government can’t see a problem here, they’re asleep at the wheel!
Just like the fees for no service scandal, the farce that is Dixon’s was able to occur due to poor oversight by the ASIC. The advisers placing money into these products were al Dixon’s employees.
It is going to be hard for Govenment to justify why advisers that had nothing to do with it should have to cover the costs of payments to the former Dixon’s clients.