“This area of policy is particularly fraught”, Stephen Jones concluded in his historic address in Parliament House’s main committee room last week as he delivered the government’s full final response to the Quality of Advice Review.
On that – if nothing else – the dozens of stakeholders in the exhausting and contentious QAR consultation process can surely agree.
Over two years, Labor (first in opposition and then in government) has attempted to take on one of the nation’s pressing policy problems.
In a collision of potentially harmful circumstances, millions of Baby Boomers are set to retire precisely as two decades’ worth of financial regulation had resulted in the median price of financial advice skyrocketing out of reach for all but the wealthiest households.
These waves of government intervention – from the Ripoll Report to FoFA, to the education and ethics reforms, to the climactic Hayne royal commission – were arguably a necessary response to the grievous harm committed upon customers by their trusted financial service providers. Conflicted models and perverse incentives in financial advice were a large part of the problem.
But equally, a scenario in which just 10 per cent of the population can afford professional advice, despite all the complexities emanating from our bizarre housing market and unique compulsory superannuation system, is simply not up to scratch. And the fact that it is the remaining 90 per cent who probably need help most presents an additional Catch-22.
For listening to the mostly small business owners struggling to keep up with the layers of often duplicated red tape, and for acknowledging some elements of those reforms were now causing more harm than good, the Labor Party deserves some credit.
This is especially so considering most (but not all) of those rules were devised and implemented on its watch, and the party is hardly known for business-friendly deregulation. Moreover, the review’s terms of reference and chair, Allens partner Michelle Levy, were set by its opponents in the Morrison government and said to be close to the banks. It might have been a lot easier politically to just pull the pin on it when elected in May 2022.
In committing to fixing the problem during the election campaign, Jones was wading into an incredibly thorny challenge: how to alleviate the burden on providers and reduce the cost to consumers without opening the door to the misdeeds of the past (and sacrificing his political career in the process).
The daily reality of that process has been an almost endless succession of meetings, speeches, hearings and consultations. While he received a much more polite reception than when engaging in the retail politics of shopping malls and RSL clubs, dealing regularly with industry associations and lobbyists is precarious in its own way.
While the so-called Joint Associations Working Group attempted to present some facade of consensus, truthfully the industry’s many warring factions and vested interests often saw things quite differently. It’s telling that less than 18 months after collectively announcing the group, most of its members have reverted to separate, individual press releases.
Mostly the industry associations are good-faith participants in the process. As the providers of these services, their members have every right to try to influence public policy, and their staff are often more technically proficient in the relevant area of the law than the Treasury boffins tasked with possibly amending it.
But their slick submissions and sensible-sounding suggestions cannot be separated from their monetary incentives. Primarily their job is to help shape law that is commercially advantageous to their members. There’s nothing wrong with that per se (although they could sometimes be more transparent about the motivation), but it invariably adds to the complexity of decisions facing the minister.
On the flipside, Jones has faced ardent opposition from the handful of passionate consumer advocacy groups. Without question they are also good-faith participants in the process, arguing for their particular conception of the public interest. But they also have a motivation to protect their legacy, as influential advocates for the formation of many of the rules and regulations now on the chopping block. Their rhetoric – while powerful at cutting through the news cycle – is sometimes based on outdated perceptions on the industry, unwilling to admit the years of hard work that has been done to regain its public standing.
Then there were all the negotiations we don’t get to see – the Labor colleagues also hellbent on safeguarding their legislative record and wondering why on Earth a former union lawyer from the party’s Left faction is even contemplating making life easier for an industry they have long viewed as a political enemy. It is understood the federal Cabinet has furiously debated the QAR proposals at times, just as the industry has.
You could say that’s all just part and parcel of politics and what they sign up for. But even by the rough and tumble standards of Canberra, advice reform is particularly difficult. It rubs up on some of the most ideologically pungent policy forces in our nation: the power of the banking oligopoly and compulsory retirement savings pool; the disingenuous dance both sides do with small business; the trauma of the GFC and string of consumer scandals.
You could also say there was too much bureaucratic process – one too many speeches, hearings, meetings, submissions. Even for those of us paid to follow and report on the process, it was hard to keep up, and Jones’ often off-script personal communication style didn’t always help.
Delicate balance struck
But in hindsight perhaps it was the right process, given it had led to a reform package that probably gets the balance right. Professional advisers will get meaningful reductions in silly paperwork requirements. Financial institutions will be given another chance (despite their past ills) to come up with a new and potentially lucrative model for the future.
And consumers might just get some more advice.
Getting a broad array of endorsements, amid increasingly divisive and toxic public debate, is an achievement, any way you cut it.
Of course, that is not to say the package is perfect. The Financial Advice Association, consumer groups and others (including an impassioned takedown by our colleague, editor-at-large Simon Hoyle) are right to question whether it connotes a wind-back of higher professional standards.
The ludicrous and somewhat Orwellian decision to call the new sub-class of advisers “qualified advisers” is especially deserving of scorn.
It is also not to say that the minister’s motivation has also been entirely altruistic. The electoral math and career considerations seem to have been never too far from the surface. For example, the support of some big industry super funds – among the labour movement’s most powerful players – has no doubt been an influential undercurrent throughout the process, and likely played a key role in the political equation in the end.
It would also be unfair to heap praise on Jones without acknowledging Levy’s role. For almost half that time it was she, not he, who ran the gauntlet of competing interests and often had her words twisted and motives questioned. Her report provided a logical and thoughtful response to a very complicated problem, even if her conclusions went too far for many.
And finally, it must be noted the process is far from over. The reforms still face a long path to parliamentary assent, with the very real prospect of a 2024 election looming in the background.
But despite all these caveats, the government, and minister tasked with this ever-troublesome portfolio, deserve commendation for listening and for trying to do something hard.
On a personal note, having written thousands upon thousands of words about this process, across multiple publications for two employers (and not all of them kind to the government, by any means), Jones has continued to front up again and again and at least hear the question (if not always entirely answer it).
Some might say that is democracy functioning.