When the Senate approved an inquiry into wealth management companies in September 2024, understandably much of the focus from the advice sector was on getting to the bottom of the Dixon Advisory collapse and its impact on the Compensation Scheme of Last Resort (CSLR).
Indeed, the majority of the submissions made to the inquiry have looked at what happened with Dixon, the role of the corporate regulator and its investigations, and the problems with how the CSLR has been set up.
However, on Friday, Financial Advice Association Australia (FAAA) general manager for policy, advocacy and standards, Phil Anderson, argued that the experiences of former Dixon clients should not be forgotten through this process.
“This week I had the chance to talk to a former Dixon Advisory client, hearing his experiences but also his understanding and views on what happened,” he said.
“We should never forget that it is these clients who are at the centre of this story and who we should feel for. What happened to them must not be repeated. This highlights the importance of hearing from Dixon Advisory clients at the Senate committee inquiry hearings.”
The client, Anderson said, invested more than $100,000 in the US Masters Residential Property Fund (URF) through his Dixon financial adviser. The client lost most of this money.
“He has gone through the AFCA complaint process, however, is sceptical about the effort involved. He has read a lot about Dixon Advisory, however, remains uncertain about some of what he has heard and unaware of some of what he probably needs to know,” he said.
“Confronting what happened and reflecting on it is challenging. For those who suffered substantial losses, and put trust in people who failed them, it can be devastating. A lot of clients will have terrible stories about the impact of the Dixon Advisory and URF disaster on them and their families.
“We discussed the Dixon Advisory business model, where an investment committee, comprised of very senior businesspeople, decided how much each Dixon Advisory client would invest in each of the Dixon Advisory-related product offerings. He could not accept that this was correct. His adviser gave no indication that he was acting upon directions from above.”
This particular point, according to Anderson, underscored the importance of hearing from the advisers that worked for Dixon to provide a deeper understanding of how the business model worked and why they followed these instructions from the investment committee.
“When I explained that the URF had not been subject to independent research and that the vast majority (85 per cent to 95 per cent) of the investors in the various URF products were Dixon Advisory clients, he was amazed and appalled. He assumed that financial advisers across the country had recommended the URF and related products,” Anderson added.
This reaction from the client potentially explains why so many Dixon clients stayed within the broader E&P Financial Group following the collapse.
In response to questions on notice from Liberal senator Andrew Bragg in July last year, the Australian Securities and Investments Commission (ASIC) said that about 3,280 of the 4,100 Dixon 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.”
Understanding why such a large proportion of clients stayed with the group after “having gone through this terrible experience” is one of the questions that Anderson believes clients could answer through the inquiry.
He also wants to know how Evans and Partners explained to clients what had happened and why they lost so much money and what remediation E&P offered them, or how they suggested the client losses could be addressed.
“We are looking forward to the Senate inquiry hearings commencing and listening to those who really know what happened and how things went so wrong,” Anderson said.
“It is only with this knowledge that what needs to change can be identified and addressed. It is the CSLR that has helped to highlight what went wrong at Dixon Advisory.
“Understanding the Dixon Advisory story in detail will help to ensure that it does not happen again and that the serious problems with the CSLR can be fixed.”
Let’s let the clients employed by government to be heard. I wonder if any were/are from Treasury or have links to Treasury…. Still waiting to hear why Dixons was plucked out to be the only retrospective claim under the CSLR.
As it’s the pockets of the likes of Alan Dixon and David Evans that have been lined, shouldn’t this be where the Wealth Mgt Inquiry should concentrate it’s investigation, and look at all the means available to recover the wealth that has passed into their greedy hands.
Spot on. Surely they are culpable and need to be held accountable.
This is a great example of the impossible situation many advisers are put in. Their employers are their licensee. As such their employers dictate the compliance rules for the organisation. Their employers can sack the adviser if they don’t follow their rules, they can issue a breach report to ASIC about their adviser, and can provide a damning reference to potential future employers under the compulsory reference rules. The employer can effectively destroy the adviser’s career, if the adviser doesn’t recommend the employer’s product. And if the employer’s product turns out to be a dud, the employer will phoenix to another entity and avoid all accountability. Completely innocent third party advisers will then be forced to pick up the tab.
Financial advice regulation is completely broken and the responsible minister is doing everything he can to avoid fixing it.
I worked for a bank as a planner for five years. I never put my clients in a fund or signed them up to something I didn’t think was in their interests. You can’t hide behind your employer or licensee. You do some due diligence before joining a prospective employer. The APL, the culture. You ask around. If it stinks don’t join them.
This whole thing stinks to high heaven, and nobody in charge has been brought to justice. The only deterrent for this type of behaviour is to go after these people and make an example of them. I am not aware anybody has even been warned. Not good enough.
Most new advisers who sign up with vertically integrated licensees, particularly as employees, don’t know enough to recognise what they’re getting into until it’s too late. It’s not something they teach at uni, even in FASEA approved degrees!
Remember all those AMP Advice career changers who thought they were signing up for an honourable career with an esteemed institution, then got slaughtered by weaponised compliance, a reputational nosedive, and sudden changes in loan and BOLR arrangements? No doubt you would say it was obvious and they deserved it. And it is obvious to everyone now in hindsight. But it wasn’t obvious to those well meaning naive newbies at the time. Just as it probably wasn’t obvious to new employees joining Dixons, that Dixons and their parent company was dodgy as.
Inertia and pareto at their finest.
Dixon is a train wreck and yet 80% of clients stayed.
One lesson that is very clear out of Dixon is that financial advisers must be banned from selling investments belonging to their owners as they are conflicted and NOT in the best interests of their clients. This is the fault of government and the regulators as they allowed this practice to happen without any consequences to the advisers involved.
Waste of time Phil. The clients that remained with Dixon’s are likely to have been ‘coached’.
Just dont let advisers sell in house products. Its not rocket science.
Yet the government is bringing this in again for insurers and superfunds. Around and around we go.