Possible unjust outcome of Dixon Advisory CSLR compo
Financial advisers being asked to fund the Compensation Scheme of Last Resort (CSLR) should be rightly angered by the fact that Evans & Partners may ultimately benefit from some of the compensation paid to affected clients.
That is one of the key messages in a Financial Advice Association of Australia (FAAA) position paper on the Dixon Advisory collapse aimed at maintaining pressure on the Government to address the issue.
The position paper, developed by the FAAA’s policy director, Phil Anderson, points to the number of former Dixon Advisory clients who moved to Evans & Partners when Dixon Advisory was placed in administration.
“The thing that is likely to infuriate the advice profession even more, is that given the high percentage of Dixon Advisory clients who moved over to Evans & Partners, it will be E&P that stands to benefit from the receipt of additional funds under advice,” the position paper said.
It said this would occur “when the compensation is paid by the CSLR into the predominantly SMSFs of the former Dixon Advisory, now Evans & Partners, clients”.
“Going forward, it will be E&P who will be the ones earning fees on this money,” the FAAA paper said.
Commenting on the FAAA’s reasoning for investigating the Dixon Advisory collapse and the actions of the Government and the Australian Securities and Investments Commission (ASIC), Anderson pointed to the anger being felt by advisers.
What is more, he acknowledges that the more digging the FAAA did on the issue, the angry it, too, became.
“Everywhere that we looked, we saw inequity and unfairness. The more we looked, the angrier we got. In the work that we have done we have identified the following six most significant objections:
- E&P Financial Group walking away from its subsidiary Dixon Advisory and leaving virtually the entire mess for the rest of the advice profession to pick up.
- The Government failing to deliver on a commitment of a prospective scheme (in which the financial advice sector would only be expected to pick up the costs of claims after the scheme started), and instead launching the scheme with a massive overhang of legacy compensation to be paid.
- The Government committing to picking up the first 12 months of costs and claims for the CSLR, but then reducing that to less than three months and only covering one Dixon Advisory claim.
- The Government failing to disclose anything about Dixon Advisory or the likely cost in the Explanatory Memorandum to the CSLR legislation, and failing to do a regulation impact statement for the CSLR.
- ASIC failing to take action against Dixon Advisory in a timely manner and then only focussing on advice issues in their ultimate civil penalty action.
- ASIC postponing the end date of Dixon Advisory’s AFCA membership which seemingly has enabled multiple hundreds of extra claims in the final months.
I’ll add another objection to the list – ASIC not pursuing E&P for phoenixing activity after they put Dixon’s into administration and then transferred the crown jewel asset to themselves ie. 80% of Dixon’s clients, without paying a cent for it.
Illegal phoenix activity occurs when a new company, for little or no value, continues the business of an existing company that has been liquidated or otherwise abandoned to avoid paying outstanding debts
https://asic.gov.au/about-asic/contact-us/reporting-misconduct-to-asic/concerns-about-illegal-phoenix-activity/#:~:text=and%20unpaid%20entitlements-,What%20is%20illegal%20phoenix%20activity%3F,taxes%2C%20creditors%20and%20employee%20entitlements.
Shouldn’t PWC the Administrator of Dixon Advisory have identified this. Another player taking a fee in this sad saga.
Good on the FAAA for calling out the huge injustice in this. You would imagine that the people at E&P Financial Group would not be too happy about all of this terrible media coverage. Well they only have themselves and the former leaders of Dixon Advisory (who all got off Scott free) to blame. Interestingly, a quick check of the Financial Adviser Register shows that only 10 of their 88 advisers are members of the FAAA (remarkable given the FAAA’s overall 60% market share), and only 17 are members of any professional association. Seemingly being part of a profession is not all that important at E&P Financial Group. One could imagine that it will be a tough time ahead for these advisers. Arguably that is a bit tough, because the responsibility should rest with those up the line, however neither the Government nor ASIC have done anything to make this happen.
Perhaps, but you can’t rely on the FAR as an accurate representation of qualifications and association memberships. It is a dodgy system, full of dodgy data. Entering advisers’ full details on FAR is not compulsory, and due to technical limitations is not possible in many cases.
And another major problem:
ASIC allowing Dodgy Dixon’s to float on the ASX in 2018 with full knowledge of the MIS fiasco, 60 complaints already received and ASIC did nothing except let the Dodgy Dixon’s directors pocket $$$millions upon $$$millions and stitch up more people via dodgy asx shares.
Interesting that a relatively small company (Entireti) has taken over the AMP advice licensees, in spite of the huge risks and potential landmines. I suspect they have done so knowing that if anything blows up, they can simply phoenix the whole thing and someone else will be forced pick up the tab. Dixons and Evans have laid out the blueprint for corporates to get away with dodgy behaviour in the advice industry, and ASIC and the government have endorsed it.
It’s always possible, But Barret knows that those 16 equity businesses (that’s the real play) were BLEECHED by the “Look Back” , PWC audits and AMP and ASIC reign of terror – their in pretty good shape( I know I was owner in one them)