“I wish I could say this is an isolated example,” Kirkland said, explaining the regulator’s concern about a small cohort of advisers who transfer client funds into high-risk investments after being referred by cold-calling telemarketers.
The industry has little chance of fighting through the legislative backlog and getting immediate wholesale change made to the ill-designed CSLR. There are things the government can do in the interim, said the FAAA, but who’s listening?
Industry ‘backed up’, waiting to invest in QAR reforms amid election uncertainty
The financial advice industry’s next wave of reform hangs in the balance, with the current government racing to get the first tranche of its Delivering Better Financial Outcomes package through parliament before the election, which could occur anytime between this August and May next year.
Meanwhile, concern is growing that investment in the next generation of systems and processes designed to accommodate the new regime stagnates, with advice groups, licensees, superannuation funds and product providers waiting for certainty on the tabled amendments.
The package of reforms, put forward by the government in response to the Quality of Advice Review, was originally split into 3 tranches, with a draft version of the first stage released late last year containing several preliminary changes aimed at reducing red tape, including consolidated fee consent forms. After a short consultation period, a bill was put forward in March which has been referred to the Senate Economics Committee for review.
The reform package, however, has been marred by errors in judgement. The proposal for a new, less qualified group of advisers to be called “Qualified Advisers” was, in Financial Advice Association of Australia CEO Sarah Abood’s words, “a red rag to a bull” for advisers that have strived to qualify under the government’s education mandate (which it subsequently watered down). There were also super fund advice fee rules that didn’t make sense, and general insurance advice stipulations that accidentally forbade an entire slice of the industry from operating.
Speaking on a Financial Services Institute of Australia webinar this week, Abood (pictured, centre) stressed that these errors, while needing to be fixed, shouldn’t stop the first tranche of reform from pushing through. The bill enacting the first set of reforms is largely concerned with administrative tweaks, which aren’t be overly controversial. “A lot will depend on the reactions to the legislation,” she said. “The more controversial the legislation is perceived to be, the more chance it will end up getting shelved.”
The timing of the next federal election, and the result, will obviously affect the bill’s passage. The government goes into what’s called ‘caretaker mode’ as soon as the Governor-General closes the Australian Parliament for a federal election, which effectively shelves proposed legislation.
Despite the first tranche being largely related to administration, a stalled bill would be a “pretty disappointing” outcome for the advice industry, Abood explained, considering how many stakeholders are waiting on the final reform to go through before they invest in systems and processes that harness the efficiencies outlined in it.
“We’d certainly like to see that certainty, because there are a lot of major institutions and large investors that are backed up and waiting to see what’s going on with that legislation,” she said. “It’s not good for our profession and it’s not good for an industry to not have investments being made. We need to be investing in the future of advice and the future of finance. And the longer this uncertainty remains, the longer those investments will get held up.”
There is a sliver of hope that the second tranche of reforms, which are set to contain more impactful changes around the provision of advice by further parties, would also get drafted before the election. This was outlined by the government in December, with the minister for financial services, Stephen Jones, saying legislation would be developed in 2024. That, however, seems unlikely.
“I’m confident we will see [tranche one] passed this calendar year, we’re well advanced on that,” said SMSF Association CEO Peter Burgess (pictured, right) on the webinar. “I am concerned about tranche two… it’s a big piece to the puzzle and we are going to need time to consider the draft legislation.”
Financial Services Institute of Australasia chief executive Yasser El-Ansary (pictured, left), who hosted the panel, took a similar view. With an uncertain, shrinking timeline, the initial bill’s passage may have a chance, but the second tranche looks much less likely to go through before the election.
“In the commercial world seven or eight months is a long time, but in policymaking and legislative reform timetables, six, seven or eight months is actually not very long, given the way parliament works and given the machinery of the parliament itself,” El-Ansary said.
