Scrapped Dixon inquiry a ‘major missed opportunity’ to investigate systemic issues

“Dropping the inquiry risks leaving systemic issues unresolved,” Unless Financial co-founder and financial adviser Dave Rae said.

It’s a sentiment shared broadly among financial advisers in the wake of Senate economics references committee chair Jane Hume confirming last week that the inquiry into wealth management companies will not be readopted.

Alongside the former financial services minister, on the committee are Labor’s Lisa Darmanin as deputy chair and Deborah O’Neill, Liberal senator Richard Colbeck, the Nationals’ Matthew Canavan, and Nick McKim from the Greens.

On Friday, Financial Advice Association Australia chief executive Sarah Abood said the association is “deeply disappointed” that the committee will not continue the inquiry.

“This important inquiry was launched in September last year, to investigate the collapse of wealth management companies (such as Dixon Advisory), and the implications for the sustainability of the Compensation Scheme of Last Resort (CSLR),” Abood said in a statement.

“The decision to end the inquiry seems extraordinary, particularly in the light of recent news about the collapse of Shield and First Guardian, potentially involving over $1 billion in consumer losses from their super.”

Rae told ifa that despite the “strict compliance” that advisers and super funds are already saddled with, consumer trust remains at risk without transparency and accountability.

“Clearly there are avenues where investors are being exploited and targeted, leaving them vulnerable to losing their life’s savings,” he said.

“These types of collapses are not new. But the size of superannuation savings makes the sector an increased target. A thorough review to uncover issues and work through recommendations and solutions is needed.”

Director and financial planner at Northeast Wealth James O’Reilly said financial advisers are “bitterly disappointed” that there won’t be “an inquiry commensurate to the scale of the Dixon failure”.

“Our profession was heavily tarnished following this debacle, simply closing the matter leaves many feeling that we're going to see similar failures in the future,” O’Reilly told ifa.

“The impacts are similarly poor for the broader financial services system. At a time where financial institutions strive to regain the trust of Australians, these developments only serve to mar progress.”

Marshan Consulting director Ben Marshan said that a “comprehensive, fully supported inquiry” is needed to examine why investment structures fail “rather than cherry-picking individual cases”.

“It’s disappointing that the Dixon inquiry lacked bipartisan support to begin with, so it is unsurprising it was discontinued in the new Parliament,” Marshan told ifa.

“While politically expedient when it was called given the upcoming election, this narrow focus missed the broader systemic issues highlighted by the subsequent Shield and Guardian failures.”

Keith Cullen, managing director of WT Financial, told ifa he understands why many within the industry are disappointed with the committee dropping the inquiry; however he believes the Treasury review of the CSLR is going to “appropriately address what leads to these failings and what can be done to stop failings like Dixon so that they never hit the CSLR”.

“I think whilst that specific inquiry’s being shelved, I don’t think the subject matter is going to be left unaddressed,” Cullen said.

““The objective of any review of the CSLR should focus on, what do we do to keep matters out of the CSLR?

“I think it’s beholden upon people in the submissions that they put forward to the CSLR and to the minister more broadly to make sure that the objective of any CSLR review, aside from fixing some of the matters associated with what happens when matters get there, surely the focus of everyone needs to be: how do we stop matters getting there in the first place?”

He added that the currently unfolding of the Shield and First Guardian collapses should be the main point of focus now.

“I know people remain angry about the Dixon scenario and the fact that Evans and Partners had the opportunity to duck a lot of liability and responsibility associated with that,” Cullen said.

“But what’s done is done in that regard as we’ve got this other very live matter at the moment and I think we need to really focus on how the government and the industry and professionals are going to respond to it.”

However, Unless Financial’s Rae termed the inquiry being shelved a “major missed opportunity”, calling on financial services professionals to reach out to their senators for an explanation.

“These failures aren’t isolated – they reveal patterns. The need for this inquiry has only become more critical and if anything should have been expanded,” he said.

“It is heartbreaking hearing the stories of people who have lost all their superannuation. We can and should be doing better to protect the retirement savings of Australians.

“I’d ask everyone in financial services to write to their local senator – ask why this inquiry was dropped, highlight the need to a review, ask for it to be re-instated/expanded. This is not just an adviser issue but has the potential to undermine the broader sector.”

O’Reilly added that the “missed opportunity is enormous”.

“The financial services sector is a critical element of our economy,” he said.

“Whilst we've made progress eliminating many problematic areas, these recent failures speak to the breadth of issues present in a complex sector. We must see our regulatory environment continue to evolve if we are committed to better serve – and protect – the needs of Australians, and this starts with thorough inquiries when failures are observed.”

Regulator should be under the microscope

Even more of a concern, according to Marshan, is the stalled parliamentary joint committee inquiries into the Australian Securities and Investments Commission’s (ASIC) capabilities and oversight.

“These are fundamental to preventing future consumer harm,” he said.

“The core issue remains ASIC’s approach to authorising MIS applications without adequate scrutiny and their slow response to misconduct reports, often only acting after billions are lost.

“As a profession and the broader financial services industry, we must advocate for urgent parliamentary review of both product misconduct and ASIC’s supervisory role before more consumers suffer.”

Rae added that there needs to be a more proactive approach to financial services regulation, rather than just being reactive, particularly as Australia heads towards the largest intergenerational wealth transfer in history.

“The sector needs strong, consistent oversight to protect consumers and maintain trust. Dropping this inquiry risks sending the wrong signal – that systemic issues can be left unresolved,” he said.

“As advisers we also have the question every time one of these failures occur – will we be paying for this through the CSLR?”

The impact on the CSLR is also a concern for Marshan, who said the government needs to ensure progress on Treasury’s review is forthcoming, as well as implementing the PJC recommendations on wholesale client tests to “protect consumers from such product failures better”.

“Otherwise, we need to hope ASIC learns quickly from these lessons and reforms itself, or Parliament needs to step in with decisive action to protect Australian consumers and restore confidence in our financial system,” he said.