According to Financial Advice Association Australia (FAAA), Financial Services Minister Stephen Jones has “clearly heard” the concerns around the construction of the Compensation Scheme of Last Resort (CSLR).
On Wednesday, FAAA chief executive Sarah Abood and chair David Sharpe met with Minister Jones to raise the various issues with the CSLR, including the cost being imposed on financial advisers and whether it is actually operating as a “last resort”.
“We have told the minister that although we support the scheme, the funding model is completely unsustainable,” Abood said.
“The financial advice profession does not have the capacity to pay compensation to the clients of large listed entities which have done the wrong thing, and nor should we. We are looking at losses approaching $135 million for Dixon Advisory alone, with nothing in place to stop similar situations happening in the future.”
The minister, she said, has heard the concerns and is “genuine in his intent to work with us to ensure that the CSLR achieves the goal that we all support”.
“He has advised us that the FAAA will have the opportunity to work with Treasury to outline unintended consequences of the CSLR and listen to pragmatic and feasible solutions,” Abood added.
“We have also called on the government to pursue a public inquiry into what really happened at Dixon Advisory. With potential losses approaching $400 million, there is a clear public interest in understanding what has happened and how similar situations can be prevented in future.”
Last month, the FAAA called for a public inquiry into the circumstances that led to the collapse of Dixon Advisory, including how the impact of the scandal is flowing through into the CSLR and costing financial advisers.
FAAA general manager policy, advocacy and standards Phil Anderson said at the time that given the potential cost to the advice profession through the CSLR could reach $135 million, “our members are demanding to understand how this has got so out of control”.
“The answer is simple, it is all about the one entity – Dixon Advisory, which has generated a total of 2,773 complaints to AFCA, more than five times the annual number of complaints for the entire advice profession and multiple hundreds of millions of dollars in client losses,” Anderson said.
“How did things go so badly wrong? That is the question that we want to get to the bottom of. This is much more than just a few advisers providing poor advice. This is about an entire business that was focused on heavily selling in-house investment products, and one in particularly (URF), that turned out to be deeply flawed.”
Four Corners can win a logie if they look into this…
There is a simple solution to this issue and that is for a blanket ban on advisers selling products they have any association with including any company that holds an interest in the practice. Make it a criminal offence to sell investments of any associated investment of any kind. All products must be at arm’s length.
AFSL’s are more conflicted that the financial advisers that work for them!!!!!!
Perhaps if Politicians/Treasury/ASIC/FAAA mentioned that fact – something would have to be done – but then how would Product Manufacturers continue to provide Advice? There are some very large Product Providers with with some serious FUM to protect out there right? Serious money? Does this money have an influence?
I totally disagree with you as the vast majority of AFSL’s and their Advisers are doing a great job, There is a minority of players that want advisers to sell their own product and this should be outlawed as it is conflicted advice and we know what outcome the client receives from investing their funds in non-arms length investments.
Lots of words from people/organisations with extended track records of doing SFA. Just kicking the can down the road while enjoying fat paychecks but not actually doing anything. It’s just another comical episode of Utopia, with the finnest part being some people actually think something will be done at some stage. LOL.
Jones, Abood & Sharpe talking pleasantries over a cup of tea & carrot cake.
Then Jones will go back to work and carry on as if nothing ever happened. Just like every other meeting FPA/FAAA has had with regulators and politicians over the years. FAAA will never be taken seriously until they get rid of their own conflicts and double standards, and become a genuine professional association.
Why isn’t the licensees PI insurance covering this??
My understanding is that the PI didn’t cover it. As a result of the penalty imposed on Dixons, they then decided to go bust. in turn, nothing then paid out to compensate their clients and ‘last resort’ being the suspiciously timed introduction of the CSLR.
…..and absolutely no one held to account for it.
Someone at the top does not want this to be investigated.
well done to the FAAA team, keep up the good work! Told my clients about the fee I have to pay because of Dixon and they were shocked and were in disbelief that I had to pays for the wrongs from another company that is ASX listed and still going with all their clients. Asked my why they didn’t have to sell the value to another company as part of the administration and why the administrator didn’t chase money from Evans if they still have all the clients.
There is a simple solution to this issue and that is for a blanket ban on advisers selling products they have any association with including any company that holds an interest in the practice. Make it a criminal offence to sell investments of any associated investment of any kind. All products must be at arm’s length.
Correct product providers should be banned from having any advisers working for them, it always causes issues
I have worked at many advice firms that have always recommend their in-house admin platforms, smsf services, and investment products such as SMAs. It just takes an investment to really crumble (like the URF) for another Dixon advisory case to happen.
Mr Jones has heard the concerns loud and clear, and he intents to ignore them as he doesn’t care.
Jones listened great! Then his lips moved and the lies just started coming out of his mouth…
Until there are actions with the CSLR that actually help remove the Dixon disaster payments from hard working advisers this is just another talkfest…
Yep, no doubt the FAAA had ‘dialogue’. Dialogue this, dialogue that.
Then his lips moved & a voice that sounded distinctly like Joe Longo was heard.
FAAA still a softly softly approach
Good on you FAAA – Doing nothing again. Supporting something that no one wants. It was ASIC that sat on the Dixon Advisory situation for over 6 years. Where is the PI cover to pay out these issues? Start becoming a stronger Industry Body, or get out of the way and allow the advisers to take over and become a professional industry.