The Financial Advice Association Australia (FAAA) has called for an independent inquiry into why the Compensation Scheme of Last Resort (CSLR) will cover claims made against Dixon Advisory, lumping advisers with the bill for hundreds of current and potential claims.
FAAA chief executive Sarah Abood said the adviser representative body was seeking answers from a number of sources, but wanted an explanation for the changes made to the scheme since its inception, why Dixon Advisory’s parent company was not being held to account and if there was a cut-off for claims.
“We’ve written twice to the minister, we are in daily contact with the Australian Financial Complaints Authority (AFCA), the CSLR team, as well as the administrator of Dixon Advisory,” Abood said in a recent webinar with FAAA members.
“We have also raised our concerns, stringently, with the opposition and will continue to do that. We have launched a campaign and we’re looking for members to support this campaign by communicating this issue with their local member.
“Ultimately, we believe there needs to be an independent inquiry into what has happened with Dixon Advisory and the CSLR.”
She said the FAAA had a number of strong objections to advisers funding compensation claims against Dixon Advisory, noting the CSLR was being applied retrospectively and the AFCA membership of Dixon Advisory had been extended indefinitely, creating an open-ended liability for advisers.
“The claims are being applied retrospectively, but that was not the intent of the scheme and it was not the expectation of our sector. In fact, it is was launched with a huge overhang of claims related to Dixon Advisory, which went into administration more than two years before the CSLR started,” she said.
“We are really concerned the AFCA membership of Dixon Advisory keeps getting extended,” she added, noting of the 4606 impacted investors, only 1948 had complained so far.
“We don’t have an end date at this point. So the deep concern we have is there are a number of Dixon’s clients who could claim and the quantum of that amount could become much larger than anything that was assumed in the set-up of this scheme.”
She added this impact would be exacerbated by the government reducing its original scheme funding commitment from 12 months to three months.
“The government is only paying $4.8 million, of which half relates to financial advice [and half to scheme costs], for period one [up till 30 June 2024], while we will pay $24.5 million for the second period,” she said, noting most Dixon claims would be dealt with in that latter period.
“So what will the government pay in the period between April and the end of June 2024? The government is paying for one Dixon’s complaint, which accounts for $2.4 million of the $4.8 million.”
