Imagine for a moment that your GP was employed by a pharmaceutical company. Would you question whether the advice and medications prescribed are in your best interest? Naturally, you would, but fortunately, this is not the case when it comes to medical professionals. However, this is the very situation that unfortunately continues to exist in the financial services industry, ultimately contributing to the demise of Dixon Advisory Superannuation Services.

The financial collapse was the result of current and future penalties, compensation claims, and three legal actions launched in late 2021 that were likely to leave the firm insolvent. 

Most claims and complaints against Dixon Advisory related to advice provided by advisers and advice to invest in in-house financial products. One such product, the US Residential Masters Fund (URF), which invested in apartments in New York, is a perfect example of how mixing financial planning advice and financial product distribution invariably leads to a conflict of interest. 

URF was established by Dixon Advisory in 2011 to take advantage of the collapse in US apartment prices following the Global Financial Crisis. The fund eventually grew to over $1 billion, largely driven by Dixon clients, many of who invested a substantial portion of their superannuation benefits. What followed was a trail of conflicts and multiple layers of fees to buy, sell, manage and renovate the many apartments. ASIC disclosed that between 2015 and 2018 Dixon Advisory had received almost $136 million in fees from URF. 

The intention of this blog is not to kick a company when it is down, but as an industry, we need to question the legitimacy of the vertically integrated model where product distribution and financial advice are intertwined. These arrangements never seem to end well and importantly there is a big question mark over whether advisers acting under such arrangements can satisfy the best interest duty. 

Although the reforms implemented on the back of the Royal Commission into financial services banned commissions and have raised professional standards, there still seems to be too many conflicts and far too often it is the vulnerable clients, who have relied on advice in good faith, that are left to pick up the pieces. 

The key message I have for people seeking advice is to ask as many questions as possible, like: 

• Who are your owners? 
• Who is your licensee? 
• Does your licensee distribute financial products? 
• Does your licensee or do any related parties, profit from the investments you are recommending?

Hewison Private Wealth’s true independence, since its inception, 37 years ago, means we are not connected to any financial institution, product, or platform. We have never accepted a dollar of commission from any third-party products or investments we recommend to clients and are engaged on a fee-for-service basis. Our unwavering independence provides clients with the confidence that our advice is totally unbiased and based only on what’s in their best interests. Our success in maintaining this independence is something we are extremely proud of, as are our clients.