DBFO a ‘really important priority’ for new minister, doesn’t want delays

The financial advice sector was largely disappointed in the slow process of the Labor government and former minister Stephen Jones in advancing the Delivering Better Financial Outcomes (DBFO) reforms, with just the first tranche being passed and half of the second being released for consultation just ahead of the election.

Following Labor’s substantial victory at the polls, the job of finalising the process that began with the Quality of Advice Review under the previous Coalition government falls to Minister Mulino.

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Speaking at a Financial Services Council (FSC) event on Wednesday morning, the new minister acknowledged his predecessor’s work on advice reform, calling the passage of the first tranche a “big achievement by Stephen Jones”.

“I also want to acknowledge that there was a tranche of exposure draft legislation was put out for consideration between March and May, and what I’m working to do is to get the next piece of exposure dropped out as soon as practical, and that’s not going to be the next few weeks, because it is a complex piece of work,” Minister Mulino said.

Having met with a range of stakeholders over his two months in the job, he said the feedback is that it is difficult to “fully digest” that draft legislation until they see how the elements from the final stage will work together with what has already been announced.

“I certainly don’t want to delay this. I’m looking to work on this as a real priority, and this is one of my top two or three priorities at the moment, but I’m also conscious that it is complex,” Minister Mulino said.

“I’m conscious that there are a wide range of views and I totally acknowledge and thank all the various players for trying to find the maximum overlap, the maximum area of consensus possible.

“But I’m also conscious of the detail matters in an area like this. I want to get this right, but the next step will be to put out the disclosure legislation on what you might call 2B, so that people can then fully digest all those elements deeply.”

Financial advice needs a ‘healthy pipeline’

Minister Mulino also noted he wanted to be clear that “Australians having access to high-quality advice is something that I see as very important”, while acknowledging that there has been a number of challenges that have led to adviser numbers dropping.

“The reduction in the number of advisers over recent years … is a matter of concern to me, because we know that at the same time that that’s happened, the number of Australians at retirement has increased, and that’s going to continue,” the minister said, adding that he wants to “talk to the adviser community about how we can deal with that”.

“I know that there are some issues around the professional pathways, which are really important, and so I think that’s part of what we need to get new advisers. We need that pipeline to be healthy. That’s something I see is really important.”

Turning to the expansion of financial advice beyond the “full-fee, sophisticated advice model”, Minister Mulino said there needs to be an acknowledgement that this isn’t always needed for every client.

“There are many, many instances where people on lower balances, for example, or people at various points in their life, might need something different to a full advice offering,” he said.

“They might need, for example, a nudge to get out of a product which is inappropriate for them, or they might need very simple guidance on what their next step might be, or what they should consider. I think we need to have a system where people can potentially reach out to or be reached out to by a service provider in ways that have guardrails, appropriate guardrails, but that don’t need them to be paid huge fees.

“Now, I don’t see that as undermining the advice model, because I think there is going to be a growing number of people who need sophisticated advice, and that’s why I think it’s critical that we have a good pipeline of people coming into the advice sector.”

However, for the “middle chunk” that only requires very simple guidance, the minister said there needs to be a “regulatory structure which allows for that”.