AFCA finds more Dixon Advisory victims

The Australian Financial Complaints Authority (AFCA) added 544 more Dixon Advisory-specific victims to total 2492 complaints at the end of April, which will further exacerbate the costs and levy financial advisers must pay.

The Financial Advice Association Australia (FAAA) has slammed the additional costs their members will incur that has already generated about a $65 million in costs they have to pay.

FAAA chief executive Sarah Abood is calling on assistant treasurer Stephen Jones to take action on the drastically escalating costs of the Compensation Scheme of Last Resort (CSLR).

"This equates to a direct cost to every financial adviser of $4165 on top of what has already been disclosed by the CSLR. This is a huge impost for the financial advice profession that is already dealing with declining numbers and spiralling costs," she said.

The CSLR opened its doors on April 2, estimating that it was ready to compensate about 2000 claimants at the time.

The financial advice industry will be forced to pay $18.5 million to fund the CSLR in the first year of operation.

Abood said: "The Dixon Advisory AFCA membership has already been extended twice and the entity was put into administration over two years ago now. We urgently call upon the AFCA board to clarify the process and timing for that membership to end."

"We also urgently, again, call upon the government to review the funding model of the CSLR. Not only is it completely unfair, but it is also economically impossible for the small business financial advice sector to underwrite the failures of large listed firms. Why should financial advisers pay for the failure of Dixon Advisory, a subsidiary of the large listed group [E&P Financial Group], which earned over $174 million in revenue last financial year?"

As at 10 April 2024, Dixon Advisory and Superannuation Services (DASS) remains a current AFCA member.

ASIC cancelled DASS's licence on 5 April 2023. The terms of the cancellation require Dixon Advisory to maintain membership of AFCA until at least 8 April 2024.

"This means it will still be possible to lodge a complaint with AFCA, because Dixon Advisory remains a member, until at least that time," AFCA said.

Abood added that the "matter represents an existential threat to our profession."

"The minister has not yet responded to our many requests for engagement on this matter, and we call upon him again to work with us urgently to find a sustainable solution to this crisis," she said.