Dixon Advisory in voluntary administration: What it means for investors
Devastated investors whose self-managed superannuation funds (SMSFs) were ravaged by Dixon Advisory's poor investment advice and the disastrous performance of the firm's in-house investments received the news this week that Dixon has been placed in voluntary administration.
The mounting claims against Dixon Advisory by investors in class actions as well as ASIC's $7.2 million penalty for not acting in their clients' best interests and having a known conflict of interest are likely to make it insolvent, according to its parent company, E&P (Evans and Partners) Financial Group.
A statement to the ASX said that the directors of Dixon Advisory and Superannuation Services (DASS) - a wholly-owned subsidiary of the E&P - "determined that mounting and actual potential liabilities mean it is likely to become insolvent at some future time".
E&P Financial Group said PwC partners Stephen Longley and Craig Crosbie had been appointed as voluntary administrators to Dixon Advisory Superannuation Services.
However, it pointed out that in the ASX statement: "No client assets are at risk ... as a result of this process."
This is because client assets are held in the clients' own names or on trust.
Dixon Advisory, one of the biggest financial advisory groups in Australia, advertised its SMSF expertise for years. Founded by superannuation guru Daryl Dixon, it was later run his son, Alan Dixon, who was CEO and set up the SMSF and financial advice business. It advertised heavily and employed big names such as Max Walsh, the former editor of the Australian Financial Review, who was given a role with the firm's investments. The Canberra headquartered firm looked after 4700 SMSFs, the retirement savings of typically hard working, middle class Australians. It was the fourth largest superannuation advisory firm in Australia.
But it all went horribly wrong when Dixon Advisory branched out into running its own investments, recommending clients to place their retirement savings into them. One of the funds, a US property fund, US Masters Residential Property Fund, plunged nearly 90% in value while the New Energy Solar Fund slid nearly 50%. Dixon's clients' SMSFs were also loaded up with shares in Evans Dixon, the parent of Dixon Advisory as well as Evans Dixon's own property funds.
Alan Dixon stepped down from the company in October 2019 and two months sold his shares in the company for $17.6 million.
The blatant conflict of interest and the sky high fees that resulted in hundreds of millions of dollars being creamed off the investments by Dixon Advisory led to the regulator, the Australian Securities and Investments Commission (ASIC), commencing proceedings in the Federal Court of Australia in September 2020 against Dixon Advisory and Superannuation Services Limited. It was found to contravene the Corporations Act on 53 occasions and Dixon Advisory was fined $7.2 million and had to pay ASIC's $1 million legal costs.
One of the downsides of SMSFs is that you are personally liable for all the fund's decisions.
If you lose money through theft or fraud, you won't have access to government compensation, according the government's MoneySmart website.
This contrasts with APRA regulated and approved funds that pay a levy to the regulator. If one of their providers defrauds the fund, they can apply to the government for compensation. The responsibility for all investing, administration, legal, auditing and accounting requirements is held by the Trustee of the APRA approved fund and not the individual members, meaning members do not need to take on this responsibility.
However, SMSF trustees can take complaints about financial products or services to the Australian Financial Complaints Authority, which has received 88 complaints about Dixon Advisory in regard to its recommendations of in-house products.
If you are a trustee of a SMSF and have had fraudulent advice and lose your money, you have limited options to claim back your money. In the case of Dixon, there are class action lawsuits being run by Shine Lawyers and Maurice Blackburn to claw back lost funds.
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