Lucky Alan Dixon cashes out of Dixon Advisory

Via the AFR:

On the afternoon of August 27, noted Quentin Tarantino fan and Dixon Advisory scion Alan Dixon dumped every single share he held in the troubled amalgam of Evans & Partners and Dixon Advisory he helped float only two years ago. By the morning of September 4, ASIC filed notice it was commencing civil action against Dixon Advisory, for allegedly failing to act in its clients’ best interests.

Eight days separate those two events. Marvellously good timing for Dixon, if not for poor old Tony Pitt at 360 Capital, now the largest shareholder, who gobbled up every single one of the shares dumped by Dixon and his private company, Mr Orange Pty Ltd, for $18.6 million.

Not for the firm’s clients:

The regulator announced the proceedings today saying it was alleging Dixon Advisory representatives failed to act in their clients’ best interests and to provide advice that was appropriate to the clients’ circumstances.

ASIC said it was also alleging that, in giving the relevant advice, Dixon Advisory representatives knew or ought to have known that there was a conflict between their clients’ interests and the interests of entities associated with Dixon Advisory within the Evans Dixon group, and failed to give priority to the clients’ interests.

The regulator said the court action related to financial advice given to eight sample clients, who were advised to invest in the US Masters Residential Property Fund (URF) and URF-related products between 2 September 2015 and 31 May 2019.

It said it would be further alleging that a total of 51 separate instances of financial advice were provided to the eight sample clients in the relevant period, each of which resulted in two or more contraventions of ‘best interests duties’ under the Corporations Act.

Adding this news to the litany of complaints to the Australian Financial Complaints Authority (AFCA) and an earlier potential class action puts a big red flag on the sustainability of the aligned advice model as legislation attempts to clean up (and out) the troubled sector.

In the vacuum of advice opportunities created by the departing major banks, the landscape of financial advice is looking fertile but more precarious to those who put their own best interests before those of their clients.

Houses and Holes
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  1. “Dixon and his private company, Mr Orange Pty Ltd”

    Are we sure he is a Tarantino fan and not a MAGA fan?

  2. what a shame it doesn’t also apply to the property sector, or even the industry super funds and who they buy property off.

  3. “but more precarious to those who put their own best interests before those of their clients”.

    I would disagree there, ASIC was not able to effectively regulate the behaviour of just a handful of entities that controlled 80%+ of the financial advice market. Entities with armies of layers and compliance staff. With those entities now gone and the advisers spread across countless non corporate licensees (including their own self license’s), the supervision and regulatory landscape is now exponentially harder.

    Operating outside the the realistic view of regulators while claiming ‘non aligned’ or ‘independent’ advice status is the wholly grail for the very individuals that built their fortunes under a conflicted advice model. The regulator is only going to go after those with the most egregious contraventions or sufficient size to warrant a headline (they will never have the resources to police thousands of individual advisers!). Your run of the mill poor and conflicted advice will flourish like it was 1989! Those conflicts will be just as bad as they always were, but now you can sell them to punters with “oh don’t worry, I have to act in your best interest by law”. Sam Henderson was the perfect example but just the tip of the iceberg of that model.

    The cherry on top is that when things do go wrong and ASIC/the lawyers finally catch with you, most clients will be fighting for years, unlike the major banks, these business have no capital to fall back on, no repetitional requirement to pay and will simply wind up and leave it to a PI insurer…. assuming that policy even pays out.

    The only saving grace is that consumers could do worse, they could always stumble into the office of a real estate agent turned developer!

    • My understanding is that it has become almost impossible to secure PI for Financial Advisors — or, it has become so expensive as to be uneconomical to service retail customers. Advisors have, instead, targeted the wholesale clients (those with $250k or more to invest in a single investment / fund) and who are considered ‘sophisticated’ and therefore less needy of protection from the regulator.

      Some clarity around this would be appreciated …

      • Yep, most of those offering PI have departed the scene. Given the compliance burden, ain’t much to be made unless someone has $500k minimum.

    • PI has certainly gotten tougher, still available but increasingly higher levels of information required at every annual renewal. Advisers I know who favour the ‘sophisticated’ space have indicated it is only a matter of time before the party ends and the bracket of retail is increased.
      It just takes a few big debacles like the above, in the wholesale space, and you can bet the regulators will be compelled to review the definitions of ‘sophisticated’. (currently net assets of $2.5m or gross income of $250k over the last 2 years)