Advice linked to inappropriate use of SMSF dominates CSLR claims

“From our initial and limited observations, when providing advice in relation to the establishment and use of self-managed super funds, it was common for the financial adviser to fail to properly assess claimants’ existing circumstances before recommending high-risk strategies, often with significant gearing and concentration risks,” the report said.

“Advisers often did not consider alternative investments that might have better met plaintiffs’ objectives. In addition, advice was often not in the best interests of claimants, especially when advisers had conflicts of interest with the products or services recommended.”

The report went on to say that more than half of the securities claims involved Dixon Advisory and Superannuation Services, with a consistent theme of misleading the claimant. The complaints related to misrepresentation of characteristics, the impending listing of securities, as well as guaranteeing returns or concealing risks.

“The CSLR has received only 18 of the expected 2,773 DASS claims. We expect to be able to provide richer insights into the patterns and trends of DASS claims in the coming period,” the report said.

Overall, the CSLR report found that consistent themes in the first three months of operations include financial advisors misclassifying the risk profile of investments and strategies not being tailored to their client’s risk profile.

“Our review of claims received to date shows that issues with personal financial advice represent the majority of claims,” the report said.

“As a last resort, we see the more extreme cases of financial misconduct. Examples include misleading and misrepresenting features of funds or products, unauthorized transactions and recommending high-risk strategies without accurately assessing a consumer’s existing circumstances.

In its annual report, the Australian Financial Complaints Authority said that in establishing the CSLR it was also addressing a backlog of approximately 5000 complaints that were on hold pending CSLR legislation.

It stated that this involved updating AFCA’s processes and case management systems to integrate the CSLR framework.

“Recognizing the need to provide timely solutions, we have increased staffing levels and appointed a Senior CSLR Ombudsman to expedite the investigation of cases,” it added.