A public inquiry into how the collapse of Dixon could happen and lead to advisers picking up the tab has been on the Financial Advice Association Australia (FAAA) agenda for months. Last month, the association stepped up its calls with the release of a paper detailing the action that the Australian Securities and Investments Commission (ASIC) has taken against Dixon.
On Friday, the FAAA announced it had met with Financial Services Minister Stephen Jones to explain the considerable concerns that financial advisers have with the construction and implementation of the Compensation Scheme of Last Resort (CSLR), including the need for a public inquiry.
Speaking with ifa, FAAA CEO Sarah Abood said that given it is a “major public scandal” in the realm of $350–$400 million, there is “huge public interest” in understanding exactly what happened.
“There’s just too many unanswered questions,” she said.
“They go from, why has no one been talking about the URF, why has no one looked at whether this product was managed in line with the PDS, for example? Did the investment manager do their job? What promises were made to the advisers and were they kept? None of that has even been addressed, and we don’t know why.”
Noting that the FAAA is “a bit stumped” as to why many of these questions have been ignored, she also pointed out that “many of the court documents been suppressed”.
“We can’t get any answers. We don’t know why. We don’t even know who did it, but things like an agreed statement of facts like that you go online, they’re not there, so we can’t imagine why that would be. It seems unusual to put it mildly,” Abood said.
“Certainly, our lawyers have advised us, but that’s curious, in their words, and they think it’s worth pursuing. There’s just so many questions like this. We think of public inquiry is the best way to get the answers that we all need.”
Attempts to get answers
There have been numerous attempts to get solid responses from the regulator and Treasury around exactly how the Dixon collapse was able to happen and whether the subsequent response was appropriate.
Senator Andrew Bragg in particular has continued to push ASIC on the investigation and regulatory response to Dixon, while also probing Treasury on the role the fallout of the debacle played in the construction of the CSLR.
Unfortunately, Bragg’s questions have not been answered with enough clarity to put the issue to bed.
Abood told ifa that while there has been a lot of questions asked in the Senate by “various people and in various contexts”, there seems to be a “little bit of a wall of science going on there and we don’t know why”.
“We can speculate, but the reality is, we don’t know why, and we’re not going to find out unless somebody with the authority to compel witnesses and documents is put in charge of an inquiry to find out. I think we’re all entitled to those answers, we’re footing the bill, after all,” she said.
“This is unjust, it needs to be fixed. I don’t want to live in a country where people are happy for wildly unjust things to continue. I’m not going to stand still for it.”
According to Abood, the FAAA made it extremely clear during its time in Canberra to meet with politicians that the association will keep pushing the issue.
“We’ve got to get those answers, and we’re not going to stop until we do,” she added.
Is this the next Dixon?
Highlighting the advice community’s fears that Dixon would not be the only instance of a firm going under and the CSLR picking up a considerable tab, recent weeks have seen a pair of firms in administration catch the eye of the Australian Financial Complaints Authority (AFCA) and the CSLR.
Melbourne financial advice firm United Global Capital (UGC) entered liquidation last week after ASIC cancelled its AFSL, though AFCA had already provided an update that it is considering whether complaints against UGC will be covered by the CSLR.
On Monday, a CSLR payment prompted ASIC to announce it had cancelled the AFSL of former national financial advice business Libertas Financial Planning.
Libertas, which was acquired by Sequoia Financial Group in August 2019, went into liquidation in May 2023. In a statement at the time, Sequoia said it planned to consolidate AFSLs, with management making the decision to transfer Libertas’ operations and customers to InterPrac Financial Planning and Sequoia Wealth Management.
An AFCA determination had previously been made against Libertas on 24 July 2023, but this was not paid by the firm. As a result, the CSLR paid compensation to the person on 24 July 2024 and notified ASIC, which prompted the cancellation.
This is the first time that ASIC has cancelled an AFSL following a payment of compensation by the CSLR.
Speaking on an FAAA webinar earlier this month, CSLR chief executive David Berry explained that if a firm still holds its AFSL and fails to pay an AFCA determination, it progresses to the CSLR.
The eventual outcome of the determination progressing to this point is that the CSLR is “required to let ASIC know that we’ve made the payment, and under that legislation, ASIC is then required to cancel the licence of that entity”.
“The legislation is really clear, the words in the legislation are ASIC must cancel the licence,” Berry said.
On LinkedIn, FAAA general manager policy, advocacy and standards Phil Anderson said the Libertas licence cancellation highlights the “ongoing issues with listed companies walking away from advice subsidiaries and placing them into administration”.
“Whilst at present, it is only one case that has been paid out by the CSLR, potentially there will be more. AFCA data demonstrates a history of complaints for this licensee over recent years,” Anderson said.
“Will the advice profession now be expected to pick up the cost of a bunch of these complaints? Why did Sequoia Financial Group put Libertas Financial Planning into liquidation and why did they avoid paying out on this AFCA determination? Does this suggest that we should expect a lot more CSLR payments to follow?
“This is not right and should not be allowed to be repeated. Listed companies should not just be allowed to walk away from their problems and leave it to everyone else to pay for. A public inquiry into the CSLR is necessary to ensure that the design of the scheme can be fixed to avoid a repeat of Dixon Advisory and more of these ’elective’ liquidations.”
The court records should show which cases have been suppressed and who applied to the court for the suppression order. That at least should be public knowledge
Surely this also has to include Libertas and Sequioa shutting down libertas to achieve the same outcome as Evans and partners did to Dixons?
Make it a criminal offence for advisers to sell products to clients where they have a connection to that provider. This will stop all the in-house product selling that is causing these huge losses.
How would we view the actions of a doctor marketing drugs where he had a financial interest in the company producing that drug.
Both scenarios are a conflict of interest.
If Dixon advisers were banned from marketing Dixon products, then these losses would never have occurred.
When will the government and the regulators learn and fix this stupidity.
The only way to get ‘huge public interest’ is to go the media. The FAAA should be appearing on every media outlet it can, to make people aware of what’s going on.
That would mean they would be spending members money which they think is theirs…
Four Corners should investigate…!
Now, a three part series on Trump “THE STORY OF THE CENTURY: THE US PRESIDENT AND HIS CONNECTIONS TO RUSSIA”. That is our ABC in action?
Exposing harsh treatment of Financial Planners? Really think the ABC would help a Financial Planner? I can still remember Virginia Trioli on ABC norming TV during the RC – refresh your memory – I suspect the ABC is not coming to help – ever?
Completely impartial is our taxpayer funded ABC?
Ok a three part series into Dixons it is then!
Another example of systemic corruption – absolutely this needs to be exposed.
So many questions. How many Dixon advisers were members of the FPA / FAAA? what action did they take?
Excellent question
Interesting question
I’d say ALL Dixon Advisewrs were FPA members, paid by Dixon. He may even have been a Corporate Member
Remermber the Max Walsh adverts- dear old Darryl always liked added “prestige”
“many of the court documents been suppressed” – The stench from Treasury & ASIC gets stronger. Suppression of court documents and the fact that they retrospectively applied the CSLR to just Dixon Advisory is rather strange.
There are shades of Mr Bates vs The Post Office in all of this, although at least Mr Bates found a politician who was on his side to help
“This is not right and should not be allowed to be repeated. Listed companies should not just be allowed to walk away from their problems and leave it to everyone else to pay for”
I’m sorry Phil no cares or is listening.
It has just been repeated. Sequoia and Libertas.
Why is the FAAA so late to the party. I guess they dont want to upset their masters at the big banks
Not the big banks anymore. But still the big licensee owners who use advice to sell inhouse product. This new breed of licensee owners are the ones most likely to benefit from a Dixons style rort.
Throwing mud at the FAAA is easy. At least they have having a “go” and pulling out all the stops.
Do you Guys have any better ideas?
Yes, join the AIOFP.
A class action run by lawyers on behalf of advisers?
Yes I do. FAAA should get it’s own house in order so they have more credibility. FPA/FAAA have been having a go and pulling out all the stops for years, but acheived virtually nothing. They must reform internally to become a genuine professional association that is taken seriously by regulators and government.