Slow progress on the Compensation Scheme of Last Resort disputes will mean the advice sector will spend the next few years covering for the sins of Dixon Advisory.
The FAAA noted in a media statement last week a further 544 complaints about Dixon Advisory have been made since 15 February 2024, generating an estimated additional cost of approximately $65 million that the financial advice profession will have to fund after Dixon went into voluntary administration in early 2022.
In a post-budget recap, FAAA head of policy Phil Anderson said it was fair to describe the association’s position as “absolutely furious” after discovering the total number of Dixon related complaints had jumped to 2492.
“What we discovered last week was the number of post-CSLR claims has jumped significantly – it has jumped by 544 based upon the previous announcement,” Anderson said.
“The point I’m making here is these matters will take a long period to resolve. That was what they thought was going to be the case with dealing with these Dixon Advisory complaints but with the additional 544, it means that it’s probably going to push it back towards the back end of 2026.”
AFCA released its lead decision on Dixon in February, when there were more than 1900 cases before the authority.
“The CSLR funding levy is based upon a financial year, so it depends upon the number of matters that are paid out in any financial year,” Anderson said.
“We can envisage the Dixon Advisory matters will be paid out over multiple years.”
Changes to adviser funding obligations were on the top of the association’s pre-budget wishlist, although Minister for Financial Services Stephen Jones has been clear the current implementation of the scheme is settled law and, along with the ASIC levy, has no appetite to modify it.
However, the advice profession has justifiably pointed out the unfairness of being lumped with responsibility to pay for the sins of Dixon.
Part of the legislation included the government funding the CSLR for the first financial year, but in practice it has only funded the final three months of FY24.
The CSLR levy has a $250 million cap across all sectors, but a $20 million cap for each of the four sectors.
Anderson said hitting the $20 million cap would cost each adviser $1300, based on current adviser numbers. The advice sector is already due to pay $18.5 million in FY25, which will be $1286 per adviser.
However, the minister also has discretionary powers to go above the cap with a special levy.
“He can choose to extend a larger levy to the impacted sectors or he can choose to spread the cost over multiple sectors or alternatively he could choose to have an arrangement whereby the payments from CLSR were done on installments so that it brings forward money from future years,” Anderson said.
“Either way when we look at this the government has a range of decisions they need to make. We have publicly said 853 complaints for Dixon alone could be worth $100 million.
“The point here I’m trying to make is that would not be just in any one year, it would be spread over multiple years and each year has that $20 million cap where the minister has discretion as to who and which sectors he might charge above the $20 million.”
