Industry experts are urging the federal government to get on with legislative changes to give consumers better, less costly access to financial advice.
The financial advice sector wants the new federal government to take action on the next raft of theDelivering Better Financial Outcomes (DBFO) reforms. This includes bedding down rules for a new class of adviser and guardrails around how superannuation funds can provide simple advice to clients.
With only 15,000 financial advisers in Australia and more than four million people aged fifty or older, the DBFO reforms are a series of regulatory adjustments to improve the affordability and accessibility of financial advice, while upholding consumer protections.
Although there are concerns around maintaining accountability and quality as advice channels diversify. There are concerns the legislation will increase red tape for advisers already drowning in admin.
Tranche 1 of the DBFO reforms is already in place and it’s understood draft legislation for part of Tranche 2 has gone through cabinet.
“We welcome the appointment of Daniel Mulino as our new minister and look forward to working with him in the critical exercise of finalising the design of these reforms before they are put into the parliament,” says Phil Anderson, the Financial Advice Association Australia’s general manager – policy, advocacy and standards.
“We trust DBFO T2 will be a priority for Dr Mulino and we will do everything we can to support this.”
Dr Mulino is the assistant treasurer and minister for financial services in the new federal government.
Similarly, Paramount Financial Solutions’ director, Wayne Leggett wants the federal government to take the extent of their election victory as a mandate to move forward with financial advice reforms.
“The risk is a change of minister comes with a change of priorities and the reforms languish. The draft legislation is also disappointingly lacking in detail,” says Leggett.
The FAAA says it’s willing to support a new class of what it calls providers, rather than advisers, as long as certain conditions are met, such as the advice given by providers should be simple in nature.
“The education standard should be sufficiently robust to ensure clients are not put at risk and that these providers can transition over time to become professional financial advisers,” says Anderson.
He says using the name providers rather than advisers for this group makes it clear they are not professional financial advisers. “Our members would prefer the word adviser is not used.”
The FAAA supports super funds providing advice as long as it’s simple and the cost to super fund members is not excessive. But the association opposes super funds providing retirement planning advice through a collective charging model.
“It is unreasonable for young members to pay for the older members of the fund to get complex and costly advice. We are also opposed to the clients of professional advisers paying directly for their advice and then also being required to pay for retirement planning advice provided to other members of the fund,” says Anderson.
Defining the new class of adviser
Verse Wealth financial adviser, Corey Wastle also supports the introduction of a new class of adviser.
“A new class of adviser could help scale access to advice, but the bar for quality and ethics must remain sufficiently high so advisers don’t trade in the trust we’ve been building. For many Australians with simple circumstances, their super fund is the most obvious place for them to get help with financial advice,” he says.
While not covered in Tranche 2 of the DBFO reforms, Leggett says there is still plenty of scope to make distinctions between different advice classes in the law.
“As it stands, only financial product advice is regulated. This means if advice is only given strategically, and no specific product is recommended, it is arguable the advice is not governed by conduct as an authorised representative.
“That said, the vast majority of advice has traditionally been given to include specific product recommendations. It would be a step in the right direction if the new regulations made a distinction between strategic and specific product advice with different disclosure obligations for the two,” he says.
Such a change is unlikely as it has not been part of the discussion in the lead-up to the release of the draft legislation.
Leggett says another concern is while the new client advice record may have fewer disclosure requirements, it may not reduce the amount of work an adviser needs to do in the lead-up to its preparation. The client advice record replaces the more cumbersome statement of advice.
“While the industry is hopeful the requirements for a client advice record are significantly less onerous than those for a statement of advice, we won’t actually know until we see the final regulations.”
While no dates have been given for next steps for the DBFO reforms, the financial advice industry expects some movement in the second half of 2025.