The Financial Advice Association Australia (FAAA) has called on the government to acknowledge the “scale of the exposure the financial advice profession faces” after freedom of information (FOI) documents showed no proper impact analysis on the Compensation Scheme of Last Resort (CSLR) had been undertaken.
While the process normally requires consideration of the options, assessment of the benefits and costs, and consultation with stakeholders, the FOI documents obtained by the FAAA show that this was likely to not have been undertaken.
FAAA chief executive Sarah Abood said the strain that has hit the advice profession on the back of the CSLR implementation should have been foreseen and could potentially have been avoided if a proper impact analysis had been conducted.
“There appears to have been no timely analysis done on the costs and benefits of the CSLR. Statements were made that the Hayne royal commission process was considered to be the equivalent of an impact analysis,” Abood said.
“We believe that this decision is deeply flawed and inappropriate in the circumstances. The royal commission had a different purpose and was finalised over four years beforehand: well before the extent of the failings at Dixon Advisory were known and well before the legislation for the CSLR was considered by Parliament.
“There appears to have been no attempt to calculate the likely costs to advisers who are funding the scheme, or to assess whether these costs are affordable or sustainable, and the likely impact on the overall cost of advice to consumers.
“This is deeply disappointing. We are calling for the government to acknowledge the scale of the exposure the financial advice profession faces and to undertake an urgently needed review of the CSLR legislation, to ensure that the CSLR is fairly and sustainably funded.”
The FAAA originally requested the documents on 18 August 2024 yet they were not provided until this month and are heavily redacted.
According to the Office of the Australian Information Commissioner, the standard time frame to process an FOI request is 30 days. However, the Freedom of Information Act 1982 (FOI Act) contains a number of extension of time provisions.
Abood said the FAAA has continued to investigate the circumstances surrounding the Dixon Advisory collapse and the way the CSLR was established.
“If the government is serious about ensuring the fairness and sustainability of the CSLR, it must act now to rectify the many flaws that have emerged since the scheme was established,” she said.
Last year, the FAAA met with Financial Services Minister Stephen 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 at the time.
“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.”
In September 2024, the Senate approved an inquiry into the collapse of Dixon Advisory, examining how the failure influenced the development and ongoing viability of the CSLR, which is scheduled to report by the last sitting day in March 2025.
The legislation needs to include the fund managers, wholesale advice AFSLs and general advice AFSLs, not just relevant providers. The whole concept of advisers paying for failed products is flawed.
Another reason to vote Labor OUT and don’t give any of your preferences to the Greens either…
Do you really think Spud and Taylor would have any concern for advisers? Jane Hume paid lipservice, but absolutely nothing else and she had a background in super.
You’re absolutely cooked if you think LibNats are on your side
spot on Sarah and FAAA, drive that wedge and we will support a class action against govt – negligence, inequity, incompetence, fairness, misunderstanding, policy failure, lack of accountability
The industry needs to highlight the conflicted relationship between political parties and product providers through the media. We also need to target politicians in their seats – starting with Stephen Jones. Successful lobbyists like the Pharmacy Guild and the Minerals Council get what they want because they know how to scare the hell out of cowardly politicians.
I have previously requested information from AFCA on the numbers of “financial advice” complaints where the issue came about because the adviser was only able to recommend products managed by a subsidiary of teh AFSL.
They said they don’t need to collect that information.
FFS, 99% of the “financial advice” related issues are where the products the advisers recommended were poor, but the advisers had no choice.
Seperate advice from products.
Not really a surprise. You have to wonder why anyone would become a financial planner in Australia.
No other industry or profession has ever been so relentlessly persecuted and pursued, discriminated and attacked over such an extended time frame by both sides of Govt.
It is now well beyond what I used to refer to a an ” unusual obsession ” but is now at a point of a blood sport out of Canberra.
The fixation and focus is beyond any form of normal.
You could name 5 other occupations in 5 seconds that require intense scrutiny and urgent legislation in order to protect the public, but oh no, lets just keep belting the Financial Advisers until every single last one of them is broken, busted or dead.
The resources poured into this addictive pursuit is completely out of kilter and is an abominable disgrace and utter waste of taxpayer dollars in what can only be described as a Govt sanctioned and approved dismantling and destruction of an entire profession.
Corrupt Canberra Pollies & bureaucrats KILL ADVISERS YET AGAIN.
And then these clowns turn round and say there are not enough Advisers, it’s too expensive.
It’s like a nightmare scene from Monty Python in Canberra, yet it’s not funny but so sad.
This is absolutely disgusting.
Another shocker added to the list.
When will we accept that we are at war and start describing our experience as one?
Jones out, ALP out.
I know for a fact that multiple requests were previously made under FOI to access the legal advice provided to Bill Shorten in 2012/13 by the Australian Government Solicitor that stated they recommended that grandfathered commissions were not to be ceased as advisers had a legal right & contractual agreement to that remuneration.
Multiple requests were made when grandfathered commissions were then abolished under the Liberal Govt & every request was refused claiming Legal Privilege as the reason.
They did not want to release the original advice because they well knew it would cause major problems.
Let’s just keep it “ in house “ shall we?
Anonymous Most of the Dixon loss is attributable to product providers who market products. The Dixon advisers were just the pawns. The real culprits were those who designed the investments that failed. If product providers design bad products, product providers should carry the liability, The Dixon advisers were just doing what they were told.
and where is Mr Jones?
Should there be a CSLR for
Poor property advice ?
Poor Share advice?
Poor mortgage broking advice
Poor accounting advice
Poor advice from government departments
Poor advice around the cost of pricing of food
Poor advice around the cost of a coffee
World is a joke
The CSLR focuses heavily on advisers while remaining notably silent on the responsibilities and accountabilities of Australian Financial Services Licensees (AFSLs). AFSLs, which oversee the conduct of their representatives, should arguably bear a proportionate share of the financial responsibility for unpaid claims arising under their licenses. This lack of accountability may allow AFSLs to avoid proper oversight of their advisers, undermining the scheme’s effectiveness in addressing the root causes of unpaid determinations.
This would be a bad idea and simply plays into the hands of the larger AFSLs who have the power to immediately pass on any costs down the line to their advisers. These dinosaurs are not good for advisers or their clients. The better advisers are fleeing to a self-licensed model in droves and it is now FAAA policy for dealer groups to be wound up once and for all.
These large dealer groups would like nothing more than upping the CSLR portion aimed at licensees. Why? Because it would lower their overall cost, and push more of the levy onto self-licensed advisers.
Very few of the issues are as a result of adviser misconduct. It is mostly due to the conflicts of interest created by the AFSL mandating (through their APL) which products advisers must use….and surprise surprise the AFSL is usually a financial beneficiary of these products.
Seperate advice from products and most of the problems disappear.
I dont get it. What PI did Dixon Advisory pay for. What scam is this that we are forking out money for incompetance. Isn’t this what the PI cover is for. This is gobbledigook at best. CSLR. What another work for rip off the Financail Advice Industry.
To quote the song from Aqua…”Doctor Jones, Jones, calling Doctor Jones”
When a company gets an AFSL to promote its own credit or property related investment fund and has no company capitalization and offers extremely large returns…targets wholesale/sophisticated clients that definitely aren’t sophisticated. but still allowed to operate until its collapse…. and ASIC allowed this to occur…what do you expect?
But the industry has to pay….
Industry Class Action to recover costs…..
Does this pass the pub test, as Albo would say?
To enact legislation that places a huge cost on an entire profession without even assessing its impacts is unbelievable. After considering the failures in the drafting of the legislation, it is now no longer a last resort, more like a first resort which negates it’s validity.
These politicians need to be schooled on the basics. Investment decisions carry risk. No one gets a free lunch. You take on risk to achieve a return, the higher the risk generally the higher the return, and sometimes the risk results in a loss.
The sad reality of this CSLR is that it now means that we as a profession are underwriting bad investment decisions taken by the public.
What makes this more concerning is that there are allegedly former Dixon Advisory clients that have remained with related parties of Dixon Advisory which in turn are being remunerated for investing funds received via CSLR!!!!!!!!
Yes, I read somewhere that E&P were able to retain >80% of the former Dixon’s clients.
Pretty good gig. Rip the clients off, have someone else pay for it, and then keep the clients.
Why are these FOI documents so heavily redacted? Are there issues of “national security” at stake, or is this simply about shielding the names of those who should be held accountable? It’s clear the government and its operators no longer see themselves as public servants in any meaningful sense of the term. Instead, they behave like grifters, viewing the public as a nuisance to be “managed” while protecting their own interests.
This is the inevitable result of an ever-expanding government bloated with ideology—it becomes an authoritarian racket, rotten to the core. The CSLR is a perfect example of this dysfunction: an unprincipled and destructive scheme from start to finish.
Why Abood and the FAAA continue to “support” the CSLR is beyond comprehension. The scheme burdens financial advisers with costs they cannot and should not bear, forcing them to pay for the sins of corporate failures like Dixon Advisory. The CSLR should not be “reviewed” or “adjusted”; it should be scrapped entirely.
The public and the financial advice profession deserve better than this farce. It’s time for real accountability and for governments to remember their role: to serve the people, not to protect themselves from scrutiny.
Shock Horror. And in other news the government confirms it hates the advice profession.
Surprise – Surprise.
Why are we surprised… It is obvious that the government was linked with Dixon to screw the rest of the advisers.