Financial Advice Association Australia (FAAA) concerns listed entities can walk away from failed advice businesses, but leave compensation claims to be funded by the advice sector, appear to be warranted with a new actions arising from the closure of Libertas Financial Planning.
FAAA chief executive Sarah Abood said the association’s members were unhappy with the funding model for the Compensation Scheme of Last Resort (CLSR) under which they are providing recompense for clients of large listed groups.
“The anger is centred mostly around Dixon Advisory and it’s looking likely that advisers will be on the hook for something north of $135 million from that scandal alone,” Abood told attendees of a webinar with FAAA members today.
“In recent times, we’ve seen some publicity about another similar scandal, albeit on a smaller scale. So, Libertas Financial Planning was a licensee of the Sequoia Finanical Group (SFG) and they closed down that licensee and some CSLR claims have started to be made from clients of that group.”
Libertas Financial Planning was placed into liquidation in May 2023 and, according to an Australian Securities Exchange announcement made by SFG, its operations and customers were to be moved to InterPrac Financial Planning and Sequoia Wealth Management, which are also owned by SFG.
“It’s likely to be on a much smaller scale than Dixon Advisory, but the principle that a large listed, integrated financial group could close a single licensee, walk away from those client compensation requirements, move the clients and advisers to another entity in the group and go on operating while leaving advisers that had nothing to do with it to pay any compensation is causing a lot of concern,” Abood explained.
She noted it was also possible former Libertas advisers and their licensees could continue to charge fees to the same clients who may also be receiving compensation.
“The unfairness of that, the injustice of that, is really firing people up. So this is our number one advocacy campaign,” she revealed.
The Australian Securities and Investments Commission (ASIC) cancelled the Australian financial services licence (AFSL) of Libertas on 14 August after it failed to pay a determination made against it by the Australian Financial Complaints Authority (AFCA) in July 2024, which resulted in the CSLR paying compensation to a person as a result of that determination.
At that time, the regulator stated that where the CSLR pays compensation in relation to an AFCA determination, it must cancel the AFSL of the firm.
