AFCA’s Lead Decisions provide a roadmap for defensible financial advice, highlighting how robust documentation, informed consent, and best interests evidence strengthen compliance and client outcomes.
Introduction
In February 2026, the Australian Financial Complaints Authority (AFCA), reached a significant milestone when it issued its 1,000th Dixon Advisory determination[1]. Up until that point, this represented the single largest single batch of complaints AFCA has ever managed.
With that record likely now in the history books – with AFCA themselves recently reporting that they had received over 3,400 complaints relating to the high profile collapse of the First Guardian and Shield (FG&S) funds[2] – the Dixon case remains significant for a number of reasons, one being that it was the first time that AFCA’s ‘Lead Decision’ mechanism came to prominence in advice circles.
Against a backdrop of soaring complaints, the Lead Decision methodology was designed by AFCA to help drive process efficiencies, effectively acting as a form of precedent that could be used in similar cases.
For advisers, these Lead Decisions are powerful learning opportunities, to be interrogated for the lessons and insights they provide. In particular, they lay bare the questions AFCA asks whenever advice is disputed – questions about how client information was gathered, whether alternatives were genuinely considered, and whether the specific recommendations were demonstrably in the client’s best interests.
In this article, we will decode four of the 5 lead decisions issued in relation to the FG&S cases, uncovering the practical signals they are sending advisers on how to make their advice more defensible.
Complaint volumes drive the need for efficiencies
Advisers and licensees aren’t the only members of the advice ecosystem concerned with efficiency.
AFCA would very much see efficiency as a priority as they are forced to deal with complaint volumes that continue to set new records. During the 2025 calendar year, a record 111,373 complaints were received, a 14 per cent increase from the prior year[3]. Over the same period, superannuation complaints – notoriously complex – grew 29 per cent to 7,687, a figure projected to exceed 8,000 during 2026.
In a way, Lead Decisions act as precedents, although not in the strictest legal sense. By providing a guide for future determinations and identifying the commonalities in issues encountered and appropriate responses, they can significantly aid an efficient review and decision-making process.
Given the large volume of complaints AFCA received in relation to FG&S, it is therefore unsurprising that AFCA invoked the Lead Decision mechanism for this batch of complaints also.
What is a Lead Decision?
A Lead Decision is a determination made by AFCA on a complaint that is representative of a group of similar complaints. When complaints share common facts or issues, AFCA selects a case that best represents the group, investigates and decides that case first. The outcome – called the lead decision – sets a clear direction for how similar complaints will be resolved. This approach helps resolve large numbers of similar complaints efficiently and fairly, ensuring consistency for everyone involved.
Importantly, AFCA makes it clear that the reliance on Lead Decisions does not come at the expense of individual complainants, with each case still treated on its merits:
“While lead decisions provide an overview of how AFCA may address similar complaints, each complaint is still investigated and determined on its own circumstances.”[4]
Understanding the overall thread of AFCA’s Lead Decisions on FG&S
In digging deeper into the specifics of individual FG&S lead decisions, it becomes apparent that there is a common thread binding these decisions together.
That thread is the principle that the collapse of the FG&S master funds – which saw 12,000 investors lose close to $1 billion[5] – was not simply a product failure, but a more widespread governance failure which exposed serious gaps in platform trustee due diligence, research house and licensee accountability, lead generation oversight and penalty and compensation frameworks.
The complaints about the FG&S failures – and the lens through which AFCA views them – relate not to the products but to the advice that drove investors into these products in the first place.
What AFCA is examining is something more specific: whether the advice to invest in these products was appropriate, given what the adviser knew – or should have known – about the client and the investment at the time the recommendation was made.
The questions they will ask as they run the rule over each FG&S complaint will thus be the similar:
- Why was this recommendation made?
- What client information was gathered, and how?
- Were there warning signs in the product that a diligent adviser should have identified?
- How genuinely were alternatives considered?
- Was the strategy in the client’s best interests?
Lesson one: advisers cannot outsource fact finding
The first of the Lead Decisions issued by AFCA involved Financial Services Group Australia (FSGA)[6], a firm that had provided advice to invest through an SMSF structure into First Guardian.
At the centre of AFCA’s concerns was the way client information had been gathered and relied upon.
According to AFCA, much of the information used by FSGA when preparing their advice had been obtained through a referral partner, rather than directly from the client. AFCA found that the adviser had limited direct engagement with the client before making their recommendations – which involved the establishment of an SMSF and the rollover of existing superannuation benefits into First Guardian.
For AFCA, this raised a fundamental question: how can an adviser be confident they fully understand a client’s objectives, circumstances and needs if key information has been gathered by someone else?
To fulfil their best interests’ duty, advisers must make reasonable enquiries into a client’s relevant circumstances and to base their advice on an accurate understanding of those circumstances. Decoding the AFCA determination, it is clear that even if aspects of those enquiries are delegated or outsourced, this should not be treated as a substitute for direct adviser engagement, and the adviser themselves will still ultimately be held accountable for them and the resultant advice.
(The proposed reforms which would see the banning of lead generation activities in relation to superannuation are a direct response to this).
In their published decision, AFCA said:
“The panel is satisfied Mr C (the adviser) relied entirely on the lead generator’s inquiries to establish the client’s relevant circumstances. This is despite the lead generator not operating under an AFSL. Given this, it is unclear whether the lead generator was equipped and qualified to understand what relevant inquiries to make.”[7]
For advisers, several practical questions emerge:
- How much of your fact-finding process is conducted directly with the client?
• What steps are taken to verify information obtained from referral partners or introducers?
• Is there clear evidence on file demonstrating that key client objectives, needs and concerns were discussed directly with the adviser?
• Could an independent reviewer determine, from the file alone, how the adviser came to understand the client’s circumstances?
The broader lesson is that advice responsibility – and accountability – cannot be outsourced. Referral partners may introduce clients. Lead generators may collect preliminary information. Administrative staff may assist with documentation. However, AFCA’s reasoning makes clear that responsibility for understanding the client, testing assumptions, and ensuring advice is appropriate, remains firmly with the adviser.
Lesson two: AFCA looks for Best Interests’ Duty in practice
The MWL[8] and United Global Capital (UGC)[9] Lead Decisions relate to switching, and are instructive for the fundamental questions they ask about Best Interests’ Duty – why this recommendation, for this client, at this time?
The basis for switching must be rock solid
In the MWL decision, the SOA recommended the complainants exit their existing superannuation funds on the basis that Shield had “a higher performance track record which can assist you in meeting your long-term retirement income objectives.”
To the extent Shield had been registered as a managed investment scheme for less than a year at the time of the advice, it had no meaningful performance history, let alone a superior one.
AFCA was – understandably – unimpressed, noting:
“It is objectively misleading to suggest it had not performed well… Shield in fact had no performance history, and the SOA’s suggestion the complainants’ existing funds had lacklustre returns was not accurate.”
Moving a client from an established, performing fund into something new and unproven requires a clear and documented rationale that holds up to scrutiny if the recommendation is later reviewed. Projected returns and performance comparisons built on incomplete or inaccurate data will clearly not pass muster.
Why an SMSF?
Both the MWL and UGC decisions found that the advice recommending the establishment of an SMSF lacked justification. In the MWL case, the SOA cited benefits including access to margin lending and direct property investments, neither of which was a strategy under consideration for the clients, and both of which AFCA noted would have been inappropriate for their circumstances.
AFCA concluded that the real underlying justification for the adviser recommending the SMSF structure “was to facilitate the complainants’ investments in Shield.”
The UGC decision reached a similar finding. The complainant had no prior investment experience beyond an APRA-regulated super fund and had not considered an SMSF before being cold called by the firm’s representative. AFCA found there was no evidence the firm made sufficient enquiries about whether the client had the time, resources, skills or experience to operate her own SMSF, and given her inexperience and poor health, she was not well placed to do so.
Cookie Cutter advice has long been on AFCA’s radar, and these decisions reinforce that recommending an SMSF requires more than listing generic advantages such as control, flexibility or investment choice. Advisers must be able to demonstrate why an SMSF is appropriate for that particular client, including whether they have the time and capability to become trustees of their own fund.
Three things AFCA wants to see
Distilling down the MWL and UGC decisions into practical adviser take outs, AFCA is really looking for evidence of three things in advice:
- Alternatives analysis: Was there a genuine consideration of other options, and if so, why were they not proceeded with?
- Tailored not generic: Was the recommended strategy actually suited to this client’s specific circumstances, not just generically appropriate?
- Objective alignment: Is there clear and specific alignment between the recommendations and what the client has said they are trying to achieve
Where an SOA cannot demonstrate all three, it is clear that AFCA’s interpretation will be that Best Interests’ Duty has not been met.
Lesson three: genuinely informed consent
While disclosure is an important pillar of financial consumer protection, it is never enough by itself. You cannot merely disclaim away any risks or conflicts or obligations –by giving a client a PDS, TMD, or an SOA with lots of fine print. There must be clear and documented evidence that the client was not only informed, but also, they understood and consented to the matters in question and was capable of acting on them.
In the UGC decision, the SOA contained warnings about the risks and responsibilities of running an SMSF. As the complainant had no prior experience with SMSFs, had not proactively sought one, and had no meaningful understanding of trustee obligations, AFCA found these warnings to be insufficient, noting that the warnings in the document did not change the fact that the complainant “was not well placed to take on the additional responsibilities of an SMSF structure because of her inexperience and poor health.”
The MWL decision similarly found they had recommended an SMSF structure “without clearly explaining what this would entail and ascertaining their capability to act as trustee.”
For advisers, this has practical implications for how file notes and SOAs are constructed. Listing risks in a disclosure section is not sufficient evidence that a client understood those risks. AFCA will look for evidence – through meeting notes and client correspondence – that the client’s comprehension was tested.
Lesson four: SMSFs and concentration risk
Concentration risk is a recurring theme in most discussions about SMSF advice, and understandably so – ATO data shows that a material proportion of SMSFs hold extremely concentrated portfolios.
Almost 30 per cent of SMSFs have 90 per cent or more of their assets invested in a single asset class, with around one-third of those funds concentrated in property[10]. This level of concentration significantly increases exposure to liquidity risk, valuation risk and sequencing risk, particularly as members approach retirement.
Concentration risk was a clear and consistent theme across the FG&S lead decisions, appearing in three of the four decisions covered in this article.
In the UGC decision, the complainant invested nearly 95 per cent of her rolled-over superannuation in First Guardian, with the remainder held in cash or paid out as fees.
AFCA’s observation on this was pointed:
“This lack of diversification concentrated risk for the complainant and was inappropriate. For example, if this specific investment did not perform, close to the entirety of her superannuation could be impacted or lost.”
The MWL decision identified the same problem with Shield. Despite purporting to be a multi-manager fund, Shield effectively used only two managers, neither with an extensive track record. AFCA noted that investing the complainants’ entire superannuation balance in a single fund with limited history and limited funds under management resulted in a “significant underweight position to other more liquid asset classes, including listed equities and more defensive assets.”
AFCA also noted that the adviser in question had failed to properly consider the fact that Shield’s own PDS described it as suitable for satellite investment, not as the core of an investment strategy.
The UGC and Next Generation Advice joint decision[11] also involved concentration risk. In that complaint, the client was advised to take his superannuation out of a well-diversified retail fund and place 71 per cent of it into Fund S, a property lending fund investing in subordinate debt and preferred equity, which its own PDS described as a high-risk investment strategy. AFCA found this “compounded their concentration risks because, if that specific investment failed, close to all his retirement savings could be lost.”
All advisers understand the risks of concentration, and again the lesson here is whether such concentration is justified, avoidable, and whether the client genuinely understood its existence and implications.
Conclusion
The Shield and First Guardian Lead Decisions are not simply about failed investments, they provide a window into AFCA’s expectations around fact-finding, best interests, advice suitability, informed consent, documentation and adviser oversight.
This article reviewed the five published decisions in the FG&S failure case, and across all of them, AFCA repeatedly asks the same question: can the adviser demonstrate a clear, client-specific rationale for the recommendations made?
Advice defensibility depends not on the volume of disclosures, but on the documented evidence that the adviser gathered accurate information about the client, thoroughly assessed alternatives, made recommendations suited to the client and their specific circumstances, and made sure the client understood that advice and the associated risks. When these processes are incomplete, poorly executed, or absent altogether, both the client and adviser are put at significant risk.
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References:
[1] https://www.afca.org.au/news/media-releases/afca-receives-record-number-of-complaints-in-2025-calendar-year
[2] https://www.professionalplanner.com.au/2026/06/shield-and-first-guardian-afca-complaints-almost-3500-amid-awareness-drive/
[3] https://www.afca.org.au/news/media-releases/afca-receives-record-number-of-complaints-in-2025-calendar-year
[4] https://www.afca.org.au/news/latest-news/afca-publishes-video-update-explaining-the-mwl-financial-services-lead-decision
[5] https://www.afr.com/companies/financial-services/asic-sets-sights-on-equity-trustees-over-65m-first-guardian-failure-20260521-p5zzbl
[6] https://www.afca.org.au/news/latest-news/afca-publishes-video-update-explaining-the-fsga-lead-decision
[7] Ibid.
[8] https://www.afca.org.au/news/latest-news/afca-publishes-video-update-explaining-the-mwl-financial-services-lead-decision
[9] https://my.afca.org.au/searchpublisheddecisions/kb-article/?id=3233850f-ddc8-f011-bbd3-7c1e5289d307&_gl=1*1pwj702*_gcl_au*MTk0NjgyOTM3Ni4xNzgxMzk4NDcz
[10] https://www.adviservoice.com.au/2026/02/cpd-smsf-advice-under-the-microscope-what-rep-824-means-for-advisers/
[11] https://my.afca.org.au/searchpublisheddecisions/kb-article/?id=93e3af8b-4a73-f011-b4cc-00224897fe37&_gl=1*1cijanx*_gcl_au*MTk0NjgyOTM3Ni4xNzgxMzk4NDcz
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