Home / Regulation / ‘Really concerned’: Jones admits worry over QAR draft, stands by advice reform schedule

"I was really worried people would say ‘Is that all?'" the minister said, before explaining that he didn't want to submit key compliance reforms until they were well-designed and collectively agreed upon.

Financial Services minister Stephen Jones has defended his decision to leave out changes to Statements of Advice and the Safe Harbour Steps in the first stage of his Quality of Advice Review draft legislation as being necessary to avoid “mistakes of the past”, but conceded he was concerned about industry response to the omission.

During a fireside discussion with Financial Advice Association Australia CEO Sarah Abood at the group’s national conference in Adelaide last week, the minister revealed a degree of anxiety at not including the two key reforms he previously characterised as “quick wins”.

“I’ve got to say I was really concerned when we put the first lot of legislation out for consult,” the minister said, “because I was really worried people would say ‘Is that all? Is that it? We’ve been talking about this since the beginning of the year and this is it?’.”

He acknowledged there was an “eagerness” to see changes to compliance – which will likely amount to a shelving of the steps that underpin Best Interest Duty, plus re-designed guidance on SOAs – and that many assumed these “pain points” would be addressed in the initial draft legislation.

The government had previously indicated in its response to the QAR that these compliance-based amendments would be included together with simpler administrative changes, such as consolidated fee consent forms, in the first of three reform tranches. The first tranche will now be broken into two stages; administration, then compliance.

The delay, Jones explained, came down to getting enough industry consultation on a “spaghetti-like” web of issues involved in pulling apart existing compliance. That consultation has now taken place, he said, but the delay pushed back the approval process in Canberra.

“We want to ensure… we’ve had good technical input, not only to the policy design, but the legislation design as well,” he told The Inside Adviser at a media briefing after the event, adding that he needed a “collective decision” from policy makers.

“We’re pretty certain that we know what we want to do here, we’ve then got to ensure that the whole government’s locked in behind it, and then we can come out,” he explained. “But let me just say, you won’t have to wait too much longer.”

Updating SOAs and the Safe Harbour Steps is more complex than the government anticipated. The changes being looked at are “interconnected”, he said, adding neither can be dealt with in isolation because “you can’t do one without the other”.

Jones’ reticence to be rushed on reform highlights the importance of getting the compliance settings right in an industry desperate for regulation that better balances efficiency with consumer protection, in order to stem the 46 per cent loss in adviser numbers since 2019.

The delay, however, does increase the odds of the government not legislating all three reform tranches before the next federal election, which could take place within a year but will more likely occur before May, 2025.

“We’re threading a big fat cable through a very small needle,” Jones said.