The Senate’s inquiry into Dixon Advisory and wealth management companies more broadly lapsed at the end of the last Parliament and, despite the Financial Advice Association Australia (FAAA) expressing confidence it would be “remounted”, the economics references committee has chosen not to pick it back up.
According to a document that committee chair Jane Hume tabled in the Senate this week, the committee met on 31 July and “resolved to not recommend that the inquiry into wealth management companies be readopted”.
The inquiry was one of two that had not been resolved at the time the last Parliament was dissolved, with the inquiry into micro-competition opportunities being readopted.
FAAA chief executive Sarah Abood said the association is “deeply disappointed” that the committee will not continue the inquiry.
“This important inquiry was launched in September last year, to investigate the collapse of wealth management companies (such as Dixon Advisory), and the implications for the sustainability of the Compensation Scheme of Last Resort (CSLR),” Abood said in a statement.
“The decision to end the inquiry seems extraordinary, particularly in the light of recent news about the collapse of Shield and First Guardian, potentially involving over $1 billion in consumer losses from their super.
“This scandal makes it clear that the issues the inquiry was investigating are not resolved, and that the misdeeds at Dixon Advisory are not an isolated case. It betrays the victims, and all consumers, who have put their faith in the government to fully investigate these collapses so we can understand how they happened, and what can be done to prevent them in the future.
“We call on all members of Parliament to support the reinstatement of this critical inquiry, with an extended remit to include the collapse of Shield and First Guardian.
“We owe it to the victims not to walk away from this.”
Senator Pauline Hanson moved a motion in the Senate for an inquiry into the collapse of Dixon Advisory and its impact on the CSLR in September last year, with its approval welcomed by the financial advice sector.
“Today marks a major step forward for our profession, and we want to thank Senator Hanson for her support in seeking transparency and for backing Australia’s small financial advice businesses in proposing this inquiry today,” Abood said in September.
The continual delays in progressing to hearings had previously caused the reporting date to be moved back four months from March to 28 July – which clearly signalled the inquiry would need to be closed down and then restarted.
However, there was a broad expectation that the inquiry would be picked back up, with FAAA general manager policy, advocacy and standards Phil Anderson noting last month that “the FAAA is now working closely with the financial services minister and the shadow minister to get the inquiry remounted”.
“Both parties have indicated that they support the inquiry and we are currently going through the processes required to do so,” Anderson said on LinkedIn.
“There is no indication that this won’t succeed. The FAAA continues to believe an inquiry is essential to understand the full scope of what went wrong with Dixon Advisory and to ensure it is not repeated.
“The recent experience with Shield and First Guardian emphasises the importance of an inquiry into such matters.”
The Shield and First Guardian funds both collapsed over the last year amid ASIC investigations, stop orders, and asset freezings against the funds, their responsible entities – Keystone Asset Management and Falcon Capital, respectively – and a number of connected individuals.
While First Guardian and Shield were not under the same management, there are a number of similarities in the conduct that drove investment into the funds – as well as the involvement of a handful of financial advice firms.
ASIC’s investigations have revealed a process of superannuation comparison services utilising a raft of high-pressure sales tactics to funnel unsuspecting Australians into these firms, which subsequently advised the clients to roll their super into a self-managed super funds or super platform and invest the vast majority of their assets into Shield or First Guardian.
Across the two managed investment schemes, there is an estimated potential loss of around $1 billion of investor funds.
