You may have seen in the news recently that Dixon Advisory Superannuation Services, Australia’s fourth largest superannuation advice firm, was placed into voluntary administration. It represents stress and potential losses for their thousands of clients and another big reputational hit to our industry.
What went wrong?
It wasn’t because their accounting software failed or tax returns were lodged incorrectly. It was because they bundled investment advice into their service. And specifically, their in-house investment products were recommended to many clients, often with very large amounts invested into what turned out to be very poor investments.
After the Royal Commission in 2018, many of us expected financial advisers would no longer be able to run this type of ‘vertical integrated model’ where advice is offered along with in-house products. This extra revenue motivation can cloud judgement creating both the perception and, unfortunately in some cases, the reality of a conflict of interest. But while investment commissions were targeted and phased out, this model persists.
The reality is that running a funds management business is more scalable and profitable than giving financial advice, preparing financial statements or tax return services and you can see this from the number of fund managers occupying ‘rich lists’ in many countries. In Dixon’s case, it seems they promoted their in-house investment fund to their clients which generated them fees of $136 million, but left their clients in the red.
This is not about kicking a company when it’s down and out but we believe financial advisers may never be seen as a true professionals until product and advice are separated.
That’s why we will continue to bang the drum for independent financial advice. When there’s no conflict, perceived or real, then you can know that the advice given to you is motivated to meet your best interests.
What should I look for in an adviser?
The question might be, how do you go about finding an adviser. We did an article after the Royal Commission and it’s just as relevant today as it was then. https://www.keepwp.com.au/the-royal-commission/
Keep Wealth Partners Pty Ltd is an independent, privately owned financial advice practice. We have no arrangements or connections with any product providers. In the rare circumstance, when a product has an in built commission (insurance), we do not retain that commission and it is fully rebated back to our client. We are only paid a fee by our clients and always act in your best interest.
Keep Wealth Partners Pty Ltd (AFSL 494858).