The world of finance is no stranger to the cautionary tales of fear and greed.
The recent collapse of one of Australia’s biggest financial advisory groups, Dixon Advisory and Superannuation Services, is an unfortunate example of how greed and professional misconduct can have lasting and devastating consequences – particularly for individuals who place their trust and hard-earned money in the hands of unscrupulous operators.
If you’ve read anything about the Dixon Advisory collapse, you’ll have heard how thousands of hardworking Australians faced financial ruin due to the firm’s appalling mismanagement of their investments. The disastrous results ravaged investor’s SMSFs and saw the performance of the firm’s in-house products plummet.
When the Australian Securities and Investments Commission (ASIC) commenced proceedings against Dixon Advisory in the Federal Court, the firm was found to have contravened the Corporations Act on 53 occasions. It faced a $7.2 million penalty as a result.
The firm’s advisers had skimmed hundreds of millions of dollars from client investments through exorbitant fees and were found to have a clear conflict of interest, showing blatant failure to act in the best interests of their clients.
It’s been more than a couple of years now since Dixon Advisory was placed into administration, but the firm’s mandatory membership with the Australian Financial Complaints Authority (AFCA) ended only last financial year. This prevents any further complaints against the firm from reaching the Compensation Scheme of Last Resort (CSLR) – a safety net framework in Australia that pays compensation to eligible people suffering from financial misconduct.
Unfortunately, us law-abiding advice firms that do the right thing are also paying the price – collectively copping an $18.5 million levy to help bail out failed advice firms ($9.5 million of which will go to Dixon claims) and which help cover costs incurred by the AFCA, CLSR and ASIC.
When people in the business of financial advice fail to act with integrity and choose self-interest over the best interests of their clients, the damaging effects on others are harmful and far-reaching. Ultimately, though, it’s clients who bear the cost.
Professional misconduct is not only ruinous to individual investors, but it also erodes trust among would-be investors and increases the costs to law-abiding professionals who do the right thing.
The take home message? Integrity matters. Do your checks and don’t be afraid to ask questions of the people who manage your money, particularly if there’s something you don’t understand.
Your financial adviser should be someone in whom you can trust and who has your best interests at heart – not someone who promises big returns or insists on selling you in-house products, which often turn sour.
Remember, it’s your money.
Turns out, choosing a prudent and only mildly profitable financial adviser as your financial advocate may well be one of your best assets.
If you’re after financial advice that aligns with your values, speak to an adviser at Align Financial on (02) 9913 9995.
