FAAA urges Productivity Commission to make phoenixing harder

The Financial Advice Association Australia has told the Productivity Commission that any changes to the insolvency regime need to more carefully restrict phoenixing activity.

Treasurer Jim Chalmers instructed the Productivity Commission on 12 May 2026 to undertake an inquiry into “reducing barriers to business dynamism” with an interim report to be published in November 2026.

The commission will be required to investigate regulatory barriers to business dynamism and recommend actionable reform options that increase productivity, the entry of new firms and the expansion of existing firms.

But it will also assess the design, operation and integrity of corporate and personal insolvency frameworks.

In a submission to the inquiry written by policy general manager Phil Anderson, the FAAA has argued that any changes to the Australian insolvency framework will need to make phoenixing activity “more difficult to undertake, not easier”.

“It is important that any changes to the insolvency regime need to more carefully restrict phoenixing activity,” the FAAA submission said.

“It is also important that liquidators are empowered to pursue phoenixing activity and that those who are responsible are held to account.”

The association added that insolvency should not be an easy solution for those who have caused detriment to others.

“…it is now a well understood pathway to transfer advisers and clients to another business and continuing to operate under a different licensee, whilst leaving the cost of outstanding complaints to be picked up by other innocent operators in the profession through the CSLR,” the FAAA said.

Phoenixing in the financial advice sector rose to prominence after the collapse of Dixon Advisory at the start of 2022.

Due to impending remediation and legal liabilities, Dixon parent company Evans and Partners placed the subsidiary into voluntary administration, while transferring clients to a different subsidiary in the process.

The company has since delisted, citing ongoing scrutiny of being an ASX-listed company while undergoing a class action lawsuit and regulatory proceedings as the primary reason.

The collapse of the company came during Parliamentary debate of the Compensation Scheme of Last Resort bill.

While the CSLR had long been advocated for, including during the Ramsay Review in 2017, the former Liberal government promised to implement one in the aftermath of the Hayne royal commission which recommended the commencement of such a scheme.

The bill, which had bipartisan support, passed Parliament under the Labor government in 2023.

Dixon Advisory quickly flooded the CSLR with claims after it was launched in April 2024 – despite the top 10 financial institutions paying $241 million in a “pre-CSLR” levy, a large portion of Dixon complaints was required to be paid out via industry levies.

Each of the four CSLR subsectors, including financial advice, is capped at $20 million a year, but since FY26 the levy has surpassed the cap with further blowouts confirmed last week for the FY27 levy.

The government is currently consulting on changes to the scheme, including a definitive funding solution for the special levy.

Minister for Financial Services Daniel Mulino extended the FY26 special levy to other parties, including APRA-regulated funds, as well as financial advisers being levied again.

While Dixon claims are soon to be paid off, the $1 billion Shield and First Guardian collapse is further expected to add hundreds of millions to the scheme, despite Netwealth and Macquarie remediating investors on their respective platforms and InterPrac Financial Planning currently remaining solvent.

InterPrac, which is responsible for the lion’s share of flows into Shield and First Guardian, has drawn scrutiny for attempts to offload the business, with concerns from investors, the FAAA and ASIC that the company may enter into administration to avoid mounting remediation liabilities.