Dixon Advisory’s AFCA membership will cease at the end of the financial year, closing off any other further complaints against the advice firm from reaching the Compensation Scheme of Last Resort.
Dixon’s membership continued after it went into voluntary administration in January 2022, which a spokesperson for AFCA tells Professional Planner is standard practice for any member of the complaints authority.
In an update, AFCA said the administrator of Dixon has 21 days to make any submissions regarding the notice of expulsion.
ASIC required Dixon to maintain membership until at least 8 April 2024, and after that it was up to the complaints authority to decide if membership was still merited.
It was after the 8 April cut-off date that the AFCA board had to decide whether it was fair for Dixon’s membership to continue, but in the meantime, the advice firm continued to pay for membership, despite being in administration.
Professional Planner will be hosting AFCA lead ombudsman for advice Shail Singh and CSLR chief executive David Berry at the Licensee Summit on 18-19 June to further discuss the Dixon complaint and remediation process.
The regulator ASIC and the complaints authority had drawn criticism over their handling of Dixon complaints, particularly from Coalition Senator Andrew Bragg, after ASIC encouraged former Dixon Advisory clients to register complaints with AFCA if they want to be eligible for remediation through the CSLR.
The scheme officially commenced in April, with $241 million already committed to “pre-CSLR claims” that would be paid by the 10 largest banking and insurance groups.
It was believed by the industry that the government would cover the first year of the scheme, but it has instead covered only the remainder of the financial year in which the CSLR commenced, which in practice equates to only three months, from April to June 2024.
The slow progress of Dixon complaints through the external dispute resolution system – AFCA published its lead case in February – has meant only one Dixon case will be paid out in FY24 with another 86 due to be paid out in FY25.
Advisers will collectively be levied $18.5 million, of which $9.5 million will go to Dixon claims, $2.1 million to 20 other advice claims and the rest related to various administrative costs to AFCA, CLSR and ASIC.
The advice sector has been vocal about the increase in the levy, particularly as the Albanese government indicated it would be forward-looking, and current independent advisers would not have to meet the costs of issues such as claims against Dixon unrelated to their own work.
In a media release on Wednesday morning, the FAAA said AFCA’s position on terminating Dixon was confirmed in a letter by authority Chair John Pollaers to FAAA chair David Sharpe, after the association raised concerns about the continued membership.
FAAA chief executive Sarah Abood said the FAAA is calling on the government to take further action as there is still considerable work to be done to ensure the funding model is sustainable.
“The FAAA supports the CSLR in principle; however, a number of substantial problems remain with the way the scheme has been funded, which threaten its long-term viability,” Abood said.
“The burden should not fall on financial advisers who have done nothing wrong. It is economically impossible for the small business financial advice sector to underwrite the failures of large, listed firms.
Abood also called out the Minister for Financial Services Stephen Jones for inaction over the issue.
“It is disappointing that Minister Jones has not yet responded to the concerns the FAAA has been expressing on behalf of members since before the scheme launched, regarding the size and scope of the CSLR, and the unsustainable nature of its funding,” she said.
Abood added that without changes to the funding model, the scheme will drive the cost of advice even higher, and runs the risk of further advisers leaving the industry, which would leave an even smaller number of advisers to fund the CSLR levy, creating a vicious cycle.
“We share a common goal with the government; to make high-quality financial advice more affordable and accessible for consumers,” Abood said.
“The CSLR is one of the biggest threats to this goal and we will continue our campaign to ensure the scheme is set on a sustainable footing.”
