AFCA flags impending cost of Shield, First Guardian
The Australian Financial Complaints Authority (AFCA) has flagged the degree to which it expects the Shield Master Fund, First Guardian Master Fund and United Global Capital collapses to feed through to costs in the system.
While complaints relating to financial advice appeared to have decline markedly in recently years, the latest annual AFCA data has confirmed that on the back of the Dixon Advisory collapse, Shield and First Guardian complaints had helped drive an 18% increase for the sector.
What is more, AFCA chief ombudsman and chief executive, David Locke backed the Compensation Scheme of Last Resort (CSLR) as appropriate in such circumstances.
Releasing its 2024-25 data, Locke confirmed there had been an 18% increase in complaints in the investment and advice sector to 4,193 complaints.
The good news for financial advisers facing into funding the Compensation Scheme of Last Resort is that their sector is still less problematic that banking and insurance, but the bad news is the number of problems already on AFCA’s books.
According to Locke, the three most complained about financial products overall in 2024-25 were personal transaction accounts, motor vehicle insurance and credit cards. The top three issues were misleading product or service information, delay in insurance claim handling, and service quality.
“Investment and advice complaints rose 18 per cent amid a string of failures, including United Global Capital, Shield Master Fund, First Guardian Master Fund, and Brite Advisors PL,” he said.
There was an allied 95% rise in complaints involving self-managed super funds (SMSF) to 1,323 complaints, accounting for a third of complaints in investments and advice. Complaints alleging failure to act in the client’s best interest rose 124 per cent to 1,266.
“What we’re seeing in complaints is a clear pattern of conflicted advice models and the inappropriate use of self-managed super funds that ultimately isn’t in the customer’s best interest,” Locke said. “This only highlights the need for the Compensation Scheme of Last Resort for victims of unlawful advice.”
Locke welcomed an improvement in claim handling by superannuation funds, with complaints about delays in claim handling falling 39 per cent in 2024-25.
“The reduction in superannuation complaints is a positive sign that improvements are being made, but we’re still concerned that the top three issues relate to service quality and we urge superannuation funds to improve service standards,” he said.
AFCA received more than 100,000 complaints for a second successive year with the following being the break-down:
- Banking and finance 54,581 complaints (down 9%)
- General insurance 34,231 complaints (up 17%)
- Superannuation 6,164 complaints (down 16%)
- Investments and advice 4,193 complaints (up 18%)
- Life insurance 1,518 complaints (up 5%)
It’s not a Compo Scheme of Last Resorts when ASIC & AFCA let every part of the financial chain off the hook except Advisers.
No Proportionate Liability to :
It should be called CSRGA = Compo Scheme Robbing Good Advisers
It still beggars belief that the founders and directors of these failed organisations walk free and seem to suffer very little financial impact. David Evans, the founder of Evans and Partners that merged with Dixon Advisory, is a prime example. He even had the audacity to allow have his newly built country house in Victoria feature on Best Houses Australia, whilst advisors foot the bill for the Dixon Advisory failure.
Let’s call it what it is, daylight robbery. CSLR where the innocent are punished for the actions of the guilty
It is impossible to cover against every transaction, we do not live in a risk free world. These laws are prepared by the PS who are extremely risk adverse people. No matter what fraud of this type will always occur.
@ John S,
Just remember all those advisers passed the FASEA “Ethics ” exam.
John, here’s the point and this is why all involved should be prosecuted to at least 10 years in the ‘slammer’.
You will never legislate for poor or inappropriate advice but there has to be sent a very clear message if you do as an adviser, there are consequences that should act as a deterrent.
The basic principles of “know your product” and “know your client” are fundamental to you as an adviser.
And in knowing that, not everything on your APL is appropriate for every client.
These advisers connected to the “Shield” advice model, failed on every level and in essence from the alleged commentary were complicit in providing inappropriate advice.
agree, but the CSLR doesn’t just punish the advisers doing the wrong thing, this punishes all advisers, even the ones that have done nothing wrong
So is anyone questionning the role of PI Insurance? What exactly is the point of it, because it doesnt seem fit for use considering the huge premiums advisers get charged.
This could be up to $60k+ per adviser if this goes tits up