It’s sadly ironic that in the same week Professional Planner Magazine reported on the welcome news from CoreData that trust in financial advice is now at its highest level since 2018, we also learnt that Dixon Advisory had entered voluntary administration.
2018, of course, was the year of the Hayne Royal Commission, when the spotlight was thrown on the far-reaching consumer harm caused largely by inherent conflicts of interest in the vertically integrated wealth model – the same model that has proved the undoing of Dixon Advisory, one of the nation’s most prominent wealth managers.
When the Commission’s final report was released in 2019, many were surprised that Hayne stopped short of advocating for a complete separation of product and advice. Hayne instead recommended that advisers be forced to disclose a lack of independence, whilst also noting the need for more robust regulatory oversight and new disciplinary measures.
The Dixon collapse and its devastating impact on thousands of investors suggests more needs to be done. Disclosure isn’t enough – a point ASIC made clear in its 2019 report.
As more clients come forward with their stories, a picture emerges of ordinary hard-working Australians – many of them senior public servants – who trusted Dixon Advisory to provide them with quality financial advice. These were not people looking for a get-rich-quick-scheme. Daryl Dixon, who founded the company before leaving in 2019, was a widely respected media commentator. In addition to weekly slots on ABC radio, he and others from the firm were routinely quoted in quality mastheads like The Age and the AFR, where paid advertisements from Dixon Advisory were a regular presence.
While Hayne correctly foresaw that vertical integration was on the way out in the banking sector, versions of the model remain within AMP and IOOF, while many small to mid-sized advisory firms still provide advice on in-house products.
The model isn’t all bad – done well, it can provide access to the efficiency benefits of scale and access to discounted deals on proprietary products.
But when advisers are selling products there will always be conflicts. In the case of Dixon Advisory, these conflicts saw the company charge exorbitant fees and throw out the rule book on portfolio diversification.
Dixon’s failure comes at an important time in policy reform.
With the upcoming Quality of Advice Review focussing on access to affordable advice, the question needs to be asked; can quality advice be assured in an industry with vertical integration still deeply embedded?
The Dixon saga also casts a shadow over policymakers’ consideration of options to expand intra-fund advice models so that fund members can be matched to appropriate products, a move that could vertically integrate the entire super industry.
It’s heartbreaking to hear of the personal losses experienced by consumers, and infuriating to consider secondary losses in the form of delayed reform to retirement income policy.
The advice industry, which thought it was ready to run ahead, finds itself forced to take baby steps once more.
Colin Tate AM, Conexus Financial founder/CEO and chair, Conexus Institute