According to the CSLR’s submission, as of 31 October, it received a total of 202 claims related to Australian Financial Complaints Authority (AFCA) determinations concerning personal financial advice, which it said represented 80 per cent of all claims received.

So far, 90 of these claims have been processed, resulting in compensation payments of about $8.95 million.

However, the value of the AFCA awards associated with the determinations for these processed claims is about $18.9 million, which the submission said highlighted the “significant impact of these decisions on affected individuals”.

According to the CSLR, inappropriate advice to use an SMSF to borrow and/or invest in property was the top theme for the misconduct, with 90 per cent of all personal financial advice claims linked to superannuation in some way.

Misleading, deceptive advice or unauthorised transactions were also common, as was advice that was not aligned to risk profile, personal circumstances or best interests of clients, and failure to conduct proper analysis or oversee investment strategy, implement a statement of advice, and regularly review investment strategies.

A total of 24 financial firms were involved in the 202 AFCA determinations, with just five firms accounting for 10 or more claims each.

While the most prolific firm in terms of claim numbers at 69 is referred to simply as ‘Firm One’, it likely relates to Dixon Advisory claims.

The submission said claims for this firm “primarily involve misclassification of consumer risk profiles and incorrect categorisation of property as ‘defensive and growth’, resulting in overly aggressive risk profiles and lack of diversification”.

“Additionally, there were recommendations for related entity products,” the CSLR said.

The other high-volume firms, with between 11 and 18 claims each, saw determinations largely related to inappropriate advice to set up SMSFs, particularly when balances were too low to be cost-effective.

One of the firm’s claims concerned overexposure to property within SMSFs “focusing on a single asset class without considering the consumer’s situation or associated risks”, while another included failure to provide ongoing advice or implement recommendations and instances of dishonest conduct.

Limited ‘information or experience’ to comment

In terms of the broader goals of the inquiry, the CSLR operator said that due to its “limited operational scope” and how early it is in the scheme’s existence, it “does not have sufficient information or experience to comment on the cause of the collapse of wealth management companies”.

“It is important to recognise that more detailed evaluations of these issues would be more appropriately handled by specialised bodies that can provide a deeper analysis,” the submission said.

However, it did touch on concerns around the potential for moral hazards related to misconduct by financial firms, particularly as it relates to phoenix activity.

“This troubling practice not only erodes the integrity of the financial system but also leaves victims without adequate recourse for their losses. The CSLR acknowledges the significant challenges in detecting such conduct in real-time,” the submission said.

“Where it observes the need for greater accountability, CSLR will refer the relevant conduct and/or financial firm to regulatory bodies for consideration and action. These mechanisms are essential to ensure that those responsible for the financial harm inflicted upon victims are held accountable, thereby safeguarding the interests of consumers, and reinforcing trust in the financial system.”

Speaking with SMSF Adviser's sister brand ifa in May, Financial Advice Association Australia (FAAA) chief executive Sarah Abood raised concerns about the role of Dixon Advisory's parent company Evans and Partners (E&P), including that it would indeed be a beneficiary of CSLR payments.

“When this compensation is paid, much of it will go to E&P as they still have many of these clients on the books,” Abood told ifa.

“It’s certainly what makes me the angriest, that advisers are on the hook for the failings of a listed entity. It’s unbelievable.”

Responding to questions on notice from Liberal senator Andrew Bragg in July, the Australian Securities and Investments Commission (ASIC) said about 3,280 of the 4,100 Dixon Advisory & Superannuation Services (DASS) clients had, by May 2022, moved to E&P.

“Every DASS client was given a choice, with some choosing to leave and the majority deciding to stay withing [sic] the group,” ASIC said.

“Most DASS clients already had a standing relationship with other entities within the group. For instance, clients may have received investment advice from DASS, but the administration of their self-managed superannuation fund was conducted by other entities, or they received broking services from another of the AFSL holders within the group.”

In addition, the regulator explained that between 1 January 2021 and 10 May 2022, E&P appointed 39 advisers who were Dixon representatives.