Dixon Advisory collapse highlights need for broad-based CSLR
ASIC’s recent call for former Dixon Advisory clients to register their complaints with AFCA demonstrates the urgent need for a broad-based compensation scheme of last resort, says the FPA.
Earlier this month, ASIC warned former Dixon Advisory clients to register any complaints with AFCA before Dixon’s membership with AFCA ceases.
ASIC stated that this is a necessary step for clients to preserve their possible eligibility under a potential future CSLR, ASIC said.
However, the CSLR has not yet been established. In addition, the draft version of this scheme has a very limited scope.
FPA chief executive said it demonstrates the need for the CSLR to be urgently established.
Ms Abood noted that the drafting of the scheme undertaken by the previous government, which lapsed in April this year, would not have covered managed investment schemes.
“This would leave financial planners to foot most of the bill for a scheme that would have left the majority of affected consumers unprotected. For example, most of the victims of the Sterling Group collapse would not be covered under the draft scheme,” she said.
“At present there is $3.7 million in unpaid AFCA determinations relating to financial advice due to insolvency. Yet MIS operators have $6.4 million outstanding against them — almost double this amount. The total unpaid determinations are $14.7 million across all the areas AFCA manages.”
The FPA said this makes it clear that the CSLR must extend across AFCA’s remit to achieve its aims of ensuring that victims of financial misconduct can be compensated where the firm involved has become insolvent.
“It’s also critical that the scheme be funded equitably, so that the current smaller number of financial planners, many of whom are small business operators, are not left bearing the full costs,” said Ms Abood.
“While it was in Opposition, Labor suggested amendments which would include MISs in the scheme, and we look forward to seeing these changes implemented now they are in government.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.