The Financial Advice Association Australia (FAAA) welcomes the decision by the board of directors of the Australian Financial Complaints Authority (AFCA) to propose ending the membership of Dixon Advisory (Dixons), from 30 June 2024 (noting the administrator of Dixons has 21 days to make a submission if it wishes).
AFCA’s position was confirmed in a letter from AFCA Chair Professor John Pollaers to FAAA Chair David Sharpe, responding to concerns the FAAA had raised with AFCA about Dixons’ continued membership.
FAAA CEO Sarah Abood said this is a fair and sensible decision, following months of relentless FAAA advocacy.
“The FAAA has been calling for Dixons’ membership of AFCA to be ended for some time. It has been extended twice, despite the fact the company went into administration in January 2022. This meant that complaints by former clients could continue to be made and would continue to be eligible for compensation from the Compensation Scheme of Last Resort (CSLR), considerably increasing the potential cost of the scheme to financial advisers well beyond the actuarial estimates.”
“Ending the membership of Dixons as proposed, effective on 30 June 2024, represents an appropriate and fair outcome for consumers, providing them with ample time to lodge a claim, as well as recognising that the profession is funding the compensation.”
Ms Abood said the FAAA is calling on the government to take further action as there is still considerable work to be done to ensure the funding model is sustainable.
“The FAAA supports the CSLR in principle, however a number of substantial problems remain with the way the scheme has been funded, which threaten its long-term viability.
“The burden should not fall on financial advisers who have done nothing wrong. It is economically impossible for the small business financial advice sector to underwrite the failures of large listed firms.
“The CSLR has created a situation where companies can simply walk away from a failed subsidiary, leaving the rest of the sector to compensate clients. This is a dangerous precedent and removes the consequences of poor or risk-taking decision making.
“It is disappointing that Minister Jones has not yet responded to the concerns the FAAA has been expressing on behalf of members since before the scheme launched, regarding the size and scope of the CSLR, and the unsustainable nature of its funding.
“Without changes to the funding model, the scheme is likely to further increase the cost of advice – through advisers either passing additional costs through to clients, or leaving the profession as a result of increased costs - further exacerbating the current demand/supply imbalance, and increasing the costs of those who remain, in a vicious cycle.
“We share a common goal with the government; to make high quality financial advice more affordable and accessible for consumers. The CSLR is one of the biggest threats to this goal and we will continue our campaign to ensure the scheme is set on a sustainable footing.”
