FAAA ramps up pressure for Dixon public inquiry

The Financial Advice Association Australia (FAAA) has written to every member of Parliament to press the case for a public inquiry into the Dixon Advisory collapse.

In a statement on 12 September, the industry body announced that it has written to all federal MPs seeking support for a public inquiry into not just the collapse of Dixon Advisory, but also the effect it has had on the compensation scheme of last resort (CSLR).

The FAAA stepped up its calls for a public inquiry in July, releasing a paper detailing the action that the Australian Securities and Investments Commission (ASIC) has taken against Dixon as well as the class action, which was settled in April; however, because both actions did not play out in the courts, there have not been answers to advisers’ questions.

As much as $135 million of this compensation bill could be charged to the financial advice profession through the CSLR as a result of the Dixon debacle, which the FAAA added could potentially cost all financial advisers more than $8,000 each and drive up the already high cost of financial advice.

FAAA chief executive Sarah Abood said the association has commenced working with Treasury on the back of a meeting with Financial Services Minister Stephen Jones in August, with the goal to fix some of the issues with the scheme.

“However, it is essential that we learn the full extent of the issues behind the multi-hundred-million-dollar Dixon Advisory scandal, to ensure it is not repeated,” Abood said.

“A public inquiry would provide clarity around the key questions that remain unanswered, including how the money was lost in the Dixon Advisory scheme, what role directors and senior management played, and why ASIC failed to adequately investigate and take action in a timely way, despite numerous complaints from as early as 2008.”

Philip Anderson, FAAA general manager of policy, advocacy and standards, added that there are “too many unanswered questions”.

“It is crucial that we understand why the fallout from this scandal has focused primarily on financial advisers while leaving the business leaders and their investment product, as well as broader systemic issues and the firm’s questionable business model, unaddressed,” Anderson said.

Abood added that with so much of the advice profession composed of small business owners, the sector “simply can’t afford to underwrite the malpractice of large, listed companies, and nor should we”.

“This was supposed to be a last resort scheme to compensate Australians who were the victims of poor or negligent financial advice, when all other avenues of restitution had failed. Instead, in the absence of true accountability for those responsible, it’s become a scheme of first resort for the many Australians that were caught up in the Dixon Advisory scandal,” she said.

“We owe it to consumers to ensure that the CSLR is fairly and sustainably funded. A public inquiry into what happened at Dixon Advisory is critical, so we can learn the lessons of this failure and ensure it can never happen again.”