Advice reform stalls as Jones dithers on SOA, safe harbour changes
Despite holding onto the Quality of Advice Review final report for 11 months, Financial Services Minister Stephen Jones released draft legislation without key planks of the Delivering Better Financial Outcomes reform package, including amendments to Statement of Advice and safe harbour requirements.
The draft legislation, released Tuesday morning, addresses only the most straightforward changes outlined in the first tranche of the reform package, including the consolidation of fee consent forms and a relaxation of the rules around financial services guide provision.
It also takes care of advice fees being deducted out of superannuation accounts, clarifies conflicted remuneration rules and sharpens consent requirements for insurance commissions.
Worthy reforms, all. Bundling fee consent into one document, especially, will remove a particularly annoying burr from the socks of advisers.
Yet this draft legislation represents the kind of fruit you bend down to reach.
After almost a year of governmental deliberation, a handful of administrative tweaks are a paltry return and bode poorly for progress on the rest of the advice review’s reforms.
Keep in mind the government held onto Michelle Levy’s final report for 9 weeks before releasing it on February 8 this year. Jones then opened what was a fourth round of consultation and took over 4 months to come up with a response in mid-June.
Back in May, when it became clear that the government would abandon the meatiest of Levy’s proposals and reform would not be swift, the usually-measured lawyer was moved to moan about the “terrible delay” in an AFR interview.
“I worry that it’s almost like there’s another consultation to find problems and impediments rather than say ‘is this workable and if it’s workable, will it be a beneficial thing to do for consumers?’,” she was quoted as saying.
The Delivering Better Financial Outcomes roadmap itself was another exercise in prevarication. The government broke down the reform into 3 tranches to give itself time to address the knottier challenges of bringing super funds back into advice and considering broadening the sector to include other providers.
The first tranche, Jones said, would include replacing SoAs with shorter documents, removing the safe harbour steps from the Best Interest Duty and making other administrative tweaks including the changes to FSG arrangements and fee consent forms.
But even after all that time, and with a reduced reform burden, the government couldn’t complete the first tranche in its entirety. The administrative tweaks were all it could manage.
A missed opportunity
The Financial Advice Association of Australia and the Financial Services Council were both careful not to put the government off side in their response this morning, welcoming the draft legislation and (understandably) touting their advocacy.
But even they were disappointed. The FAAA said it was “concerned” about SOA changes being dropped and the FSC said the draft was “modest” and represented just a “down payment” on reform.
“It is a missed opportunity to have deferred implementing key recommendations on abolishing the ‘safe harbour steps’ and simplifying statements of advice, which would achieve the most in reducing the regulatory cost burden on financial advice,” FSC CEO Blake Briggs said.
The ten-year reform package?
Yesterday, Jones said he’d have a solid policy position on SoAs and safe harbour by the end of the year.
Assuming he uses the Christmas break as an excuse to miss that date, the first tranche of legislative reform might not be through the legislative process in its entirety before the next federal election in 2025. That’s not hyperbole – take into account another consultation on the SoA/safe harbour proposals, plus the tendency for financial services reforms to slide down the parliamentary preference pole when another important bill arrives.
Then there are two more tranches – each tackling reforms far more complex than the first one. By the time the third tranche of reform comes around it could well be the purview of a new financial services minister with a new set of priorities.
The Quality of Advice Review, first proposed by Hayne in 2018, could take a decade to complete – if at all.
By then, it might be time for a review.