CSLR and the cost of Dixon Advisory
This week has seen a big focus on the CSLR, and particularly the cost to the financial advice profession - $18.6m in 2024/25. The underlying story is the issue of the Dixon Advisory business. At last count, there were 1,948 Dixon Advisory complaints sitting with AFCA. To put this into perspective, AFCA received just 600 advice complaints in the entire 2021/22 year across all entities and less than 500 (excluding Dixon Advisory) in the 2022/23 year. The 10 largest financial institutions in Australia need to pay for the complaints received up to 7 September 2022 (a total of $241m), and the Government and the advice profession share the cost of the remaining 310 cases. And when I say share, I should be clear, the Actuaries appointed by the CSLR suggest that the Government will pay 1 of these matters and the profession the rest. How unfair is that? That is another story!
This actuarial firm have suggested that 95% of the Dixon Advisory complaints are likely to receive a payment from the CSLR. That is a remarkably high percentage, which draws me to the evidence in the first AFCA Dixon Advisory case. The table on page 7 of this determination illustrates the percentage of related party products held by this client (between 54% and 74%). That is an incredibly high percentage.
This case rests upon the issues of compliance with the BID and the client priority rule. Who would believe that it was possible to comply with the obligation to prioritise the interests of the client, when you are recommending such a high allocation to related party products? No one can have products that were that good, and the associates of Dixon Advisory certainly were not. That is why we have this CSLR mess. This brings me to my second point; should small business financial advisers be covering the cost of the CSLR when the problem was caused by the performance of the products of a related entity? Is that entirely or even predominantly an advice problem? I welcome your thoughts on all of this.