There is a range of misconduct that has caused smaller advice firms to rack up significant numbers of complaints to the Australian Financial Complaints Authority (AFCA) – thankfully, only one adviser’s actions relate to theft and gambling losses.
Speaking with ifa, Compensation Scheme of Last Resort (CSLR) chief executive David Berry said it was “disappointing” that the failures are continuing to take place.
“I just don’t know why there’s so much coming out now,” Berry said.
“Our expectation had always been with all of the regulatory change and oversight and education requirements that was going into this space, that we’d be on a positive trajectory where we would see less and less.
“Our ultimate objective is that there’s no need for a scheme like us, that we’re more a token – that would be our best-case scenario. We just don’t see that happening anytime soon.”
He added that part of the CSLR’s focus has been on trying to highlight that it’s not just the large-scale failures – instances such as Dixon and United Global Capital – that are taking a toll.
“[Failures] don’t need to be hundreds of millions of dollars to have an impact,” Berry said.
“But the number of firms that are failing and the impact of any eligible misconduct is just not slowing down, and I’ve highlighted this to both the minister and the shadow minister. From what we can see, this mountain of claims that will be eligible is getting bigger and not smaller.
“With the requirement for an AFCA determination before being considered by the CSLR for compensation, the number of claims paid is dependent on AFCA’s capacity. With the volume of potentially eligible complaints remaining high, we expect it will take AFCA some time to work through the work relating to current known firms.”
Grouped under the category of “Other Personal Financial Advice” in the CSLR’s revised estimate for FY2025-26 is a list of six insolvent firms that have seen a combined 187 complaints lodged with AFCA.
Looking at just FY25–26, the revised estimate for this category increased from 28 claims and $2.77 million to 101 at a cost of $9.13 million – almost as costly as the Dixon Advisory claims outstanding in FY25–26.
Throw in the $2.09 million in AFCA fees attributed to these determinations and even without the large financial failures, the personal advice subsector would clear the originally planned $10 million cap.
On the ‘watch list’
According to Berry, these firms – APT Strategy, Next Generation Advice, Suetonius Wealth Management, Wealth Trail, Wise Investment Advisers, and Octillion Partners – are part of a “watch list”.
“We’ve got firms on there where we are yet to see claims but believe they’re coming, we just don’t know what they’re going to be,” he said.
“Things like Brite at the moment is in our ‘massive’ watch list, the impact of Shield Master Fund and First Guardian are also in that watch list. With Venture Egg now coming along with all other firms on our potential watch list, we’ll just continue to watch how many complaints AFCA are getting and what the size of those expected losses could be.”
When the smaller firms find their way onto the watch list, Berry added that they have the potential to “creep from being ‘material’ to ‘significant’ – and then we get the surprises”.
APT Strategy, for instance, has had a total of 59 complaints lodged with AFCA.
The firm, which went into liquidation in February 2024, has been caught up with Australian Fiduciaries Ltd and also had Compare Your Super as a corporate authorised representative.
The super comparison service that allegedly funnelled leads to APT Strategy went into liquidation November 2023, while ASIC has secured asset preservation orders against Australian Fiduciaries.
AFCA determinations related to APT Strategy – of which only three have so far been published – have all gone against the firm. They also all involve poor SMSF rollover advice and claims in excess of the CSLR’s $150,000 cap.
Next Generation Advice, which has the distinction of being connected to both the Shield and UGC collapses, so far only has a single determination against it published – awarding more than $250,000 to the complainant as a result of advice to invest in UGC’s Global Capital Property Fund.
Suetonius Wealth Management is yet to see any determinations published; however, ASIC has permanently banned its former director and responsible manager, Peter Surtenich.
Surtenich had recommended to at least 18 clients that they invest in a “Principal-protected Private Placement Program” that offered “high yield” returns, according to the regulator.
ASIC added that he had made dishonest representations that the investment was “capital protected”, was “similar to” a cash investment, and could generate high returns.
Former financial adviser Bruce Stuart Davis, who was the sole director, responsible manager and financial adviser of Wise Investment Advisers, has also been banned by ASIC – though only for seven years.
It largely related to misleading and deceptive representations to clients regarding the high returns they would achieve from his recommendations and trading.
Meanwhile, Octillion Partners had its licence cancelled thanks to the conduct of financial adviser Shane Allan Rose, who engaged in dishonest conduct by using client invested funds for purposes other than which they were given.
How can a fund manager with a trustee the size of perpetual and then the reporting agency APEX not report misappropriation of funds? How does an ex ASIC employee run one of these collapsed schemes, flee overseas and the advisors cop the brunt of the failings? How can this even happen in Australia? The regulators do nothing for years. Its sickening
I’ve personally been caught up in this. $245K.
So disappointed to see that the former manager of Compare Your Super has his own podcast…. not a care in the world…
How can this be?
The article primarily names Australian Financial Services Licensees (AFSLs) rather than individual financial advisers—except in the case of former adviser Bruce Stuart Davis, who was the sole director, responsible manager, and adviser at Wise Investment Advisers. This highlights how individuals can sometimes shield themselves behind a corporate structure or AFSL until misconduct is eventually uncovered.
The current licensing model, which allows advisers to operate under third-party AFSLs, can delay the detection of misconduct. If financial advisers were licensed individually—similar to other professions—accountability for dishonesty or misrepresentation would be more direct and timely. This shift would make it easier to identify and address misconduct at the individual level, rather than navigating the dual responsibility of both the AFSL and the adviser.
Throw in both Alan Dixon and David Evans who both hid behind corporate structures for their protection. Both rotten to the core.
The AFSL is meant to monitor the advice given by its Advisers – and so avoid misconduct.
The problem there has been, and remains, many AFSL Responsible Managers don’t have the quals/exp.
Individual licensing would remove this current layer of oversight (which is imperfect) and likely mean more problems and greater difficulty with the recovery of losses.
The current licensing model not only makes it harder to identify and address misconduct, it makes it easier for product company licensees to drive inappropriate behaviour. Advisers’ careers are held to ransom if they don’t promote their licensee’s inhouse products. The licensee has all the power in this relationship, thanks to the ridiculous licensing model. Yet regulators and politicians choose to blame advisers, rather than fixing the real problem.
Let’s keep repeating the same (mistakes)… until we bleed-dry the last adviser. Take a bow, regulators, when you remove your head from the sandbox.
It’s possible that the $3000 ethics course doesn’t improve ethical behaviour and is a waste of time and money.
Yet another way to fleece the hapless adviser. That’s the real motive.
The reason there are more instances coming up is due to the moral hazard of the process becoming more well known and attracting more crooks.
Crooks know they can set a up a dodgy operation to rip off consumers, run off with the money, phoenix the operation, and never be held accountable. Innocent advisers will be forced to pick up the tab instead.
CSLR is the CAUSE of the problem. CSLR incentivises consumer harm.
100% correct.
Some accountants have been ripping off clients for years and some solicitors have been helping themselves to trust accounts for centuries so I’m not sure why higher education would see the CSLR not being needed. Hopefully the need reduces over time but that is more likely to be due to there being less financial planners and people simply ripping off clients without bothering to be licensed.
Let me paint a picture—without naming names—of four individuals who worked together in the early 2000s.
One of them never became a licensed financial planner but was actively recommending property development schemes to SMSFs. He encouraged people to cash out their defined benefit funds to invest in what were essentially Ponzi-style property projects. Because he was never licensed, he flew under the radar and avoided regulatory scrutiny. He was caught 20 years later.
The other three did become financial planners. One was a director in a company that was known for misleading the public and yet continues to operate as a planner today. Another, who was involved in similar misconduct, has since been banned from the profession—but somehow managed to become a Responsible Manager (RM) before that. The fourth is currently running an AFSL. These individuals were engaging in questionable practices 25 years ago, and it seems little has changed. It’s a classic case of leopards not changing their spots.
Here’s the real issue: why should honest, hardworking financial planners be forced to pay for the damage caused by these individuals? ASIC has failed to catch up with half of the people I’ve described, even after two decades. These people are slick salespeople, and the public stands little chance against their polished pitches and false promises.
While I commend efforts—like those from Senator Andrew Bragg and others—to clean up the industry, the current approach risks destroying the profession entirely. If good businesses are continually made to bear the financial burden of bad actors, many ethical planners will be driven out. I know there are many more like the ones I’ve described, and where money is involved, there will always be scammers.
But we must stop punishing the good for the actions of the bad. If the CSLR had existed 25 years ago, I might have left the profession myself. There are simply too many bad apples, and I don’t want to be paying their dues. I entered this field to make a difference—to help my clients with integrity and care. The CSLR levy is a cost I cannot afford, especially as someone who isn’t a smooth-talking salesman chasing profits at the public’s expense.
It happens in Town and Country 😉
Please advise of any other profession or industry where innocent providers are forced to pay compensation for other poor providers of advice and product, when the innocent advisers have NOTHING to do with the problems?????
Does this exist in any other profession or industry?????
Do Politicians and Bureaucrats pay compensation for massive failures like Robo Debt that cost over $1 Billion in tax payer compensation.
Why don’t Politician’s and Bureaucrats pay Compo too ???????
Do pharma pay for COVID injuries ?
Would it make sense to limit the ability to provide advice on SMSFs to specific individuals, rather than allowing all registered advisors to do so by default? Additionally, could we consider removing the wholesale category altogether?
These changes could help address concerns around the quality and intent of advice, and potentially reduce the involvement of individuals who may not be acting in clients’ best interests.
Why punish wholesale investors who value efficiency?