The comments from Certainty Advice Group managing director Jim Stackpool come amid criticism of Evans Dixon’s heavy promotion of its own US Masters Residential Property Fund (URF) to its clients, as well as their reliance on the fund, which he said accounts for 67 per cent of Dixon’s total group revenues.
Drawing attention to this ongoing conflict in the financial services industry, Mr Stackpool said the law fails to protect the consumer from vertically integrated business models such as Evans Dixon’s, saying “the fact there’s a conflict of interest is irrelevant under law”.
Further, he said a contributing factor is the client’s trust that their adviser has done due diligence on the recommended funds.
“That is what people pay for. And when they’re getting poor advice, they still don’t leave. There are often high fees on turnover of assets, which make it harder to close funds,” Mr Stackpool said.
“People are busy, they don’t have time to do all the research, and they trust their adviser to do the right thing. And a lot of these institutions know this.”
Mr Stackpool said while the URF Fund’s complicated, multiple-fee structure is relatively rare in Australia, conflict of interest between advice and product is not.
However, he said there are ways advisers can look after client investments into the future.
“First, consumers must learn that the ‘safe harbour’ law does not protect all their interests. Trust in financial advice cannot be built when conflicts (perceived or real) are present,” Mr Stackpool said.
It all comes down to how advisers are paid – disclosure is not enough. Renumeration structures drive culture; unconflicted remuneration where clients pay for advice directly rather than advisers being paid from products is the best way.”
FinBiz Advisers principal adviser Annette Pulbrook said it would be interesting to know if Dixon had been advising its clients to sell out at any point.
“They’d turned off the management fees for the URF in 2017. Now they’re in damage control against a potential shareholder revolt, as clients have not only been losing money in some of their Dixon investments, but also from their Evans Dixon shareholdings,” she said.
“I suspect Dixon are less worried about the quality of their advice, and more concerned their clients may be turning on them.”
Huon Financial Planning principal Anne-Marie Humphries said conflicted advice is being about ‘ticking boxes’.
“Vertically integrated institutions know how to tick the compliance boxes under the existing framework to protect themselves, while still recommending ‘in-house’ products to their clients. It may not be the best option for the client, but it’s legal, and they can do it,” Ms Humphries said.
Again and again? I’ve seen this before alreayd
I have made 20 complaints to ASIC over the last 20 years , now I have given up. Me – Planner x is is a crook due to this stuff I am outlining ….ASIC , we have received your report and have it sitting on the big pile . Me … Can I have feed back on this investigation …,. ASIC , No, how dare you ask what and who do you think we are !!!! , Me ,PS my dealer group and X plan have breached the privacy act by sending plans and client data ,for SOA ‘s etc offshore and interstate to boiler rooms to be processed unbeknown to my clients . ASIC , we cannot consider your complaint because you are a planner and the privacy commissioner only considers complaint from clients not planners ….. Me – But I am a client of my own firm … ASIC are you still there ????? , Privacy commissioner , case closed go figure !!!!!
Is this the same or different to DIxon Advisory Group? The SMSF place in Melb. I went for a job there a decade ago and they told me they don’t hire planners, they train them. I soon realised they just essentially set up SMSF’s and funnel money into their in house managed investments and make way more from the MER’s than the SMSF fees.
I have always watched and waited for this to come home to roost one day but not sure if this is related to this story. Same thing though.
We’ll never be a true profession until that sort of thing is stamped out.
And that IS different from a bank planner using an aligned platform. A platform is one thing, its using the in-house underlying options that I’m less pleased about. An AMP planner using an AMP platform with competitive platform fees and features is no concern to me if the underlying portfolio is properly constructed and has little or no AMP funds. Its when its 100% in AMP funds that concerns me. (Purely using AMP as example, could be same for any of them).
Here we go again. Why is it that people in our industry can be so arrogant & greedy?! All the regulation in the world can’t stop it, so it’s time to rethink the whole thing. Tear down Chapter 7 & ASIC and start again. This time keep the lawyers out of it and ask practitioners with unblemished records about how it should be dealt with. At least you’d have a half a chance of getting it right with workable solutions.
Back to Dixons. During the last 5 years, I have had a dozen prospective clients (who were with Dixons) meet with me to discuss their circumstances to determine if we can assist. All had their portfolios loaded up with “in house” product.
The worst case was a couple who had c. $1.8 mill in industry super funds. They had seen a Dixons adviser prior to seeing me. They told me that the first words out of the Dixons adviser’s mouth were that they immediately needed to establish a SMSF, and he’ll do it for them, which he did. No SoA, no Switching advice, just get a SMSF. The clients brought the SMSF establishment documents and the SoA (I use that term advisedly, because it wasn’t an SoA) to their appointment with me. It was clear that the SMSF was established 6 weeks prior to the date of the SoA, which was that date the clients first met with the Dixon adviser. The SoA recommended a SMSF be established 6 weeks later, with no switching advice. The SoA also recommended rolling out of their industry funds (with no tax or buy/sell spread analysis) and pile into the Dixon “in house” products (no meaningful information was provided on those products within the SoA, other than a bunch of marketing spiel). The clients were minded to take the Dixon advice, however, I pointed out the folly of it all, including the illegality surrounding the absence of switching advice. I also advised that they should consider reporting the behaviour to the regulator, however, they didn’t want to cause any trouble. Therein lies a significant issue…sometimes clients aren’t aware of how they can be duped, and when they find out, they are generally reluctant to report it. I guess the fear of potentially looking foolish takes priority. Anyway, the clients became paralysed with fear and decided to stay with their industry funds. As it happens, a better outcome for them.
So I took the bull by the horns and contacted ASIC and laid it all out in meticulous detail, served up on a silver platter, clearly noting, inter alia, the absence of switching advice in the SoA.
So, I’ll bet you are dying to know what happened? As far as I can determine: Nothing, zippo, nought, nix, zero, zilch, diddly. I wasn’t able to rouse ASIC from their slumber, even for a lay down misere.
Not that it matters much now because it appears Evans Dixon has to deal with issues on many fronts. There is potential they may not to survive, and if so, good riddance because alleged rogues like this need to be removed from the industry…with extreme prejudice. I wonder how Darryl & Max are feeling about this turn over events.
Banks are not the only financial planning organisations with vertically integrated strategies. Many financial practices / Licensee have their own or badged products or services that they recommend on which they clip the ticket
Another train wreck that has been waiting to happen. Another instance of ASIC apparently asleep at the wheel.