Financial services industry leaders and lobbyists are increasingly confident of presenting a united front to the next government of either stripe, following a historic consensus reached at the Professional Planner Advice Policy Summit.
Minister for Financial Services Stephen Jones is expected to release draft legislation for Tranche 2 of the Delivering Better Financial Outcomes reform package before the looming federal election despite his resignation from federal politics.
This scenario would leave virtually no prospect of getting the bill passed in this government’s first term, given this is widely believed to be the final parliamentary sitting week before an election is called. However, the emerging likelihood of a draft law backed by the various financial services industry associations and factions has dramatically boosted its chances of surviving beyond Jones’ tenure as minister.
“I think we will get a draft bill before the election and that’s very important because if [Minister Jones] does successfully thread the needle on that, it goes as far as we could possibly go at locking in a future Labor minister, should there be one,” Financial Services Council CEO Blake Briggs told the summit at Old Parliament House, Canberra, on Tuesday. “We need to be able to make sure that they see this as low hanging fruit and that requires all of us to jointly be able to advocate.”
While Briggs conceded there is “infinite capacity to stuff it up from here” via problematic drafting by Treasury, the more contentious elements of the DBFO Tranche 2 package – especially those relating to the infamous “new class of adviser” (NCA) proposal – seem to have been settled.
‘Tie on a bow on it’
Upon opening the summit on Monday – in what was probably his last public appearance at an industry event – Jones said there was now “no lack of consensus” between industry lobby groups, with technical legal drafting issues the only remaining potential pitfalls.
It is understood the draft legislation will contain five components of which four are substantially drafted. According to Treasury sources, this element is the “modified best interest duty”, which Jones confirmed was proving “tricky”. Nonetheless, the outgoing minister added he was still hopeful he could “tie a bow on it and get it done”.
This indicates the fiery debate understood to have taken place over the NCA proposal between some stakeholders during a series of closed-door and confidential Treasury consultations in recent months has eased.
Briggs said even if there were drafting errors, the growing consensus between the major players now meant their positions were close enough to likely resolve any issues by simply “getting the groups together”. He added: “Then we’re able to collectively… go to the new minister and say ‘we can de-risk this for you’.”
Industry super fund representative Misha Schubert, CEO of the Super Members Council, said there was “unanimity of purpose and strategy” among the key stakeholders, though added there was still a “final mile” to traverse regarding the drafting of the legislation.
Matt Lawler, CEO of the so-called NewCo made up of former AMP advice firms now part of the Entireti Group and a representative of the Licensee Leadership Forum, agreed consensus reached at the summit gave the legislation the best shot of being embraced by the next government.
“We have got a portfolio of things that are ready to go, and if we can get together as a group and usher those through and make it really easy for those things to get implemented, that’s the first step of us working together in the future,” he said.
Fellow licensee boss Keith Cullen of WT Financial Group said he accepted the arguments put forward by super funds and insurers that their self-directed, low-balance or disengaged customers needed to be able to speak to their provider about their product more easily.
“But that doesn’t mean they should be allowed to provide a professional opinion or make a professional recommendation to them, and they don’t need to be able to for that problem to be solved,” he said, referencing a line in the sand that the legislation is expected to clarify.
Speaking under the Chatham House rule, one licensee executive acknowledged there is still angst among many, especially practising advisers, over the scope of the advice that could be provided under the NCA regime, as well as who can employ them and how they are remunerated for their services, including collective charging mechanisms by super funds.
However, the executive said these reservations did not stop licensees embracing the government’s previously announced position, which was that collective charging in super funds would be allowed on the basis that licensees and advice firms are also able to hire this new tier of provider.
Marisa Broome, a practising adviser and principal of boutique firm Wealthadvice and former chair of the Financial Planning Association (now Financial Advice Association Australia), said even if the advice profession were willing to accept the introduction of the NCA, it would not stomach use of the term “new class of adviser” (albeit an improvement on the previous and much-maligned iteration “qualified adviser”).
“[It should be clarified as the] ‘new class of someone who gives some guidance’,” she said. “I don’t like using the word adviser [in relation to this proposal] at all because they’re not an adviser. ‘Financial adviser’ and ‘financial planner’ are regulated terms – so let’s take the advice word out of that and talk about what sort of guidance they can offer.”
‘All in on DBFO’
Anne Fuchs, executive general manager of advocacy and impact at Australian Retirement Trust, said the $300 billion mega-fund was backing the industry consensus, which she said works in favour of both super fund trustees and private sector advice providers.
“We have been all in on DBFO because it’s not the silver bullet, but it will allow us to help and guide more Australians who we can’t help and guide with confidence,” Fuchs told the summit.
“We have been all in on this because our members need to us to be, so that they can have those bite-sized bits of simple advice associated with their account and so we can empower professional advisers to see more Australians.”
Damien Mu, CEO of AIA Australia and co-chair of the Council of Australian Life Insurers, said the long policy development process that has followed Michelle Levy’s Quality of Advice Review might have been sped up if the industry had spent more time focusing efforts on other senior Labor figures.
“Let’s make sure we’re working with the ministers that are delegated to our portfolio, but there’s a whole government and next time, I don’t want it to not be on Jim Chalmers’ radar as a priority. [Anthony] Albanese is our Prime Minister. This is a national issue.”
The prime minister did commit to the DBFO reforms in an exclusive interview with Professional Planner in August 2023. But the reform package is widely seen to have little strong support in Cabinet beyond the outgoing minister, despite his protestations to the contrary.
Schubert, a former parliamentary press gallery journalist and lobbyist for the higher education sector, said the industry was in a position to come together and work on its messaging to the broader public now that much of the contentious detail had been settled. Asked what one anecdote or statistic might cut through with politicians and the mainstream press, she said: “It’s hard to go past the 2.5 million Australians on the runway to retirement in the next decade who currently do not have the access they need to accessible, affordable advice.”
“Let’s make sure we’re working with the ministers that are delegated to our portfolio, but there’s a whole government. This is a national issue”
– Damien Mu, CEO, AIA
Mu, who oversees both health and life insurance businesses at AIA, echoed that access to affordable advice needed to be seen as a social reform and prioritised as a health and wellbeing issue for the general public.
One super fund executive described the summit as a “breakthrough moment” for negotiations around DBFO, which had descended into tribal disagreements despite broad consensus when the QAR process was kicked off by the previous Coalition government. The former CEO of a publicly listed company, also speaking under the Chatham House rule, said it had been “pivotal” for relations between super funds and practising advisers and licensees.
Beyond the industry consensus, Super Consumers Australia CEO Xavier O’Halloran said he cared about the advice reform project because “some consumers do want advice”, although he made clear consumer advocacy groups would have their say once the draft laws are unveiled.
“There’s been plenty of cases in the past where people have been taken advantage of,” he said. “We want to make sure the consumer protection regime that sits around the expert advice people are going to…works as well as it can.”
Full coverage of the Professional Planner Advice Policy Summit can be viewed here.
