Financial Services Minister Stephen Jones’ parting gift for the advice sector has been met with dismay from the Financial Advice Association Australia (FAAA), which has criticised every element of Friday’s draft legislation.
In a statement late on Monday afternoon – more than three days after the minister released the exposure draft for the next stage of the Delivering Better Financial Outcomes (DBFO) reforms – the FAAA said it would “continue to analyse” the legislation and engage with members to deliver a formal submission.
However, having taken a critical eye to the proposal over the weekend, chief executive Sarah Abood said the FAAA “cannot support it without substantial change”.
“This is a pretty disappointing outcome considering the large amount of time and resources that have been invested over three years to finding ways to deliver high-quality financial advice to more Australians,” Abood said.
The FAAA echoed concerns from others within advice on the simplification of statements of advice (SOA), for which it “had high hopes”.
“Analysing the requirements for the new ‘Client Advice Record’ or CAR, we haven’t found a material difference between these obligations and those for statements of advice, in the legislation,” Abood said.
“We were hoping for a much lower level of prescription, and greater recognition of professional judgement, as well as indications as to how the other areas of prescription (notably the impact of ASIC interpretation) would be dealt with.”
‘Concerning on many levels’
However, the association was far more outraged by the parts of the draft legislation focused on superannuation advice, particularly as it relates to collective charging.
“Our single biggest concern in relation to the draft legislation is that it appears to give super trustees the ability to collectively charge for comprehensive retirement advice,” Abood said.
“This is concerning on many levels. Firstly, the cost of collectively charged retirement advice is likely to be very much larger than the cost of collectively charged intra-fund advice.
“Thus, members of these funds will be paying much higher amounts for advice they are not actually receiving – including members who have sought, and paid for, their own personal financial advice but must still pay for the collectively charged advice provided to other members of the fund on top of that.”
According to the FAAA, there is also a lack of clarity around who within a super fund will be able to offer this level of advice, specifically whether it would apply to the still undetailed new class of adviser (NCA) or only qualified professional financial advisers.
“We have stated elsewhere, and many times, our position that retirement advice should only be offered by licensed professional financial advisers,” Abood added.
“This type of advice is both complex and high stakes for the consumers involved – because if poor advice is given in this life stage, it can be extremely difficult for a consumer to recover their financial position when no longer earning income from personal exertion.”
Professional advisers, she noted, are far more suited to providing this advice “safely”, as they have the education, experience and ethical obligations necessary.
“If we are saying these are no longer required for such an important facet of consumers’ financial affairs, then this undermines the whole point of professionalising financial advice,” Abood said.
“Also in this section, there doesn’t seem to be any positive obligation on trustees to offer advice in important areas of retirement to consumers such as estate planning, aged care and age pension (including the Home Equity Access Scheme) – although they may choose to do so. These are areas where the super fund has no particular incentive to offer any advice as it does not impact on assets in the fund.”
‘This is not advice, it is product sales’
The scope of advice wasn’t the FAAA’s only issue with the superannuation-related changes, also taking aim at the ability for funds to accurately target specific cohorts in the way the legislation envisions.
“The draft legislation also provides for super ‘nudges’ – referred to interchangeably as ‘(general) advice’, ‘super product advice’ and ‘prompts’ in the documentation,” Abood said.
“It requires trustees to develop a framework that can be used to target groups of members (which can be as small as two members) with ‘advice’ that suits their cohort as a collective – rather than any individual in the cohort.
“While there’s a list of characteristics given that could be used for cohorting (such as age, income, home owner status, relationships status etc), the reality is that super funds generally don’t hold much of this information on their members.”
According to the CEO, this important and costly area is one in which professional advisers provide the most value, through helping clients pull together all of the information necessary to build a “comprehensive picture” of their current position and future goals.
“Cohorting members based on anything other than age is going to be very difficult for super funds to achieve at present, without the support of a dedicated data collection function – across, for some funds, millions of members – which would presumably be collectively charged,” Abood said.
“Overall, our concern is that these provisions could be used to effectively ‘staple’ a member to their super fund for life, with no trigger for the member to consider whether the current fund is still the right one for them in retirement, and no support for their retirement needs beyond an allocated pension and/or annuity. This is not advice, it is product sales.”
The FAAA noted that the remaining DBFO measures that were carved out of the legislation – including the NCAs and modernisation of the best interests duty – are important to the current draft.
“We will be consulting with members on the detail of this package over the course of March and April, in order to finalise our submission by 2 May,” Abood said.
“We remain committed to ensuring that these reforms can achieve their stated policy intent, to deliver high quality and affordable advice to more Australian consumers.”
Message to regulators: make life even more difficult for those pesky advisers… including going back and forth and then, back again (backflips drive them crazy).
Australia’s super funds size rivals Canadian pension funds. Snouts firmly embedded in trough. Lots of money to be made by the puppet-masters, at the expense of their members.
Why the outrage and shock. This was a done deal years ago. The industry funds can charge fees to all members to subsidise the provision of advice to a few. Only a fool and patsy, that’s the majority of the advisor cohort believed the outcome was going to be any different.
The majority of small advisors will be gone within 10 yrs.
Their work will be undertaken by industry funds as was the intention all along.
They regard super as the domain of the Labour Party alone.
Comment of the day, week, month and year.
I suspect most of us (advisers) are bracing ourselves for this. I’m not convinced the Labor party is solely to blame… Josh-from-accounts had his own sneaky plans.
We all know this is a rort. So what next, what can be done as a collective? Pool funds and advertise against the proposed changes and shambles of labor? Liberal no better, smash labor so liberal start making fair assessments of policy changes? Copy the finance broking industry and lobby hard?
Conflicted super and retirement PRODUCT advice versus independent super and retirement FINANCIAL advice is what is at stake here!!!
I wonder how many super fund advisers will nudge clients with a terminal illness to withdraw their funds?
Maybe FAAA will now realise the folly of being in JAWG. It has constrained FAAA from fully advocating for adviser/consumer interests, and has effectively given adviser support to product company interests. Time to get the hell out of JAWG FAAA.
The FAAA is right to sound the alarm over the DBFO exposure draft, which reeks of an agenda that’s been in play from the start. Financial Services Minister Stephen Jones appears to have had one goal since taking office: to hand industry super funds a “lowered bar” so they can “talk” to their members under the guise of advice, securing their high-value members for the long term. The for-profit professional advice sector, with its independent expertise, has always been the real threat to industry super’s dominance—a threat this draft seeks to neutralize. The earlier push for a New Class of Adviser (NCA) was a clear attempt to let super funds create an army of lower educated and cheaper “advisers” to sell their members into their own pension products, a funds under management (FUM) grab dressed up as reform. When Jones couldn’t deliver the NCA, he pivoted to this parting shot: broadening collective charging to include retirement advice for all members. The FAAA’s outrage is justified—this isn’t about better outcomes; it’s about entrenching industry super’s control.
What’s most insidious here is how collective charging—really just a euphemism for “free” advice—undercuts the entire profession. Backed by massive marketing budgets and soon-to-be-legal “nudging,” industry super funds can offer retirement advice that no for-profit adviser can compete with, stapling members to their funds for life. This isn’t simplification or accessibility; it’s a blatant assault on professional financial advice, devaluing the education, experience, and ethics that define the sector. They’ve gone for the jugular, and it’s heartening to see the FAAA finally standing up for its members against this existential threat. Make no mistake—this is war on the advice profession, and the stakes couldn’t be higher. The sector must unite and fight back with everything it’s got, because if this draft passes unchanged, the damage to independent advice could be irreversible.
Very well said. The draft combined with the CSLR debacle is making me seriously reconsider whether I even want to continue my career. I’ve spent nearly 20 years as a CSO/Paraplanner, have just finished my degree and I am sitting the exam in June.
I can’t comprehend why there aren’t advisers rioting in the streets over this?
I don’t understand why the FAAA has sat silently for at least as long as I’ve been involved in the industry and watched each government of the day slowly dismantle this industry.
Make it make sense.
Because they are weak and meek.
If you are under 45 seek a new field.
“Our single biggest concern in relation to the draft legislation is that it appears to give super trustees the ability to collectively charge for comprehensive retirement advice,” Abood explained.
Remember when, after the RC in 2018, collective charging was bad? Remember all the comments on these pages and MM – how the community expected better “community expectations”, how if the advice was any good, then a fee could be charged, and how collective charging reduced the retirement outcomes of retirees? Even had Compare the Pair adv – don’t pay commissions etc?
Where are all those same people now – why has “community expectations” changed?
Ethics – act above the law – but now it seems commissions are bad – but if renamed and allowed by a different group of product providers – all OK?
I just saw a potential client from an industry fund with $600K looking to open a SMSF.
My thoughts (not advice) were to stay with the industry fund as the SMSF was not going to do any better and be more expensive and an admin headache.
However, if the industry funds start charging everyone for advice costs that are not used/relevant to them, then I will be saying to prospective clients with industry funds – you need to look at alternatives….
My advice, not thoughts, are: move the client to any number of non-industry platforms and add-value to their investments. You will be amazed by the information available from research firms (including Lonsec and Morningstar) – we should not be mindlessly flocking to ETFs.
I recently moved two clients away from Catholic Super & UniSuper – the “XYZ” platform fees were about $500 p.a. lower and the MER was also a slight improvement – yes, their risk profile was changed from balanced to Growth.
Hardly a parting gift. More like a parting shot.
Shoot back.
My cynicism has been verified as legitimate with this garbage from government.
Wow. Is FAAA/FPA FINALLY starting to stand up for its members?
The only other time I heard anyone from FAAA/FPA say anything this critical of government was when Dante de Gori didn’t realise his mic was still on after an excruciating interview with Jane Hume.
I thought I was the only one who saw that ha ha. Haven’t we had some hopeless politicians in this role?
Had they done this over the past 15 years we likely wouldn’t be in this mess. They were no better than the govt, taking money from people and doing nothing for it.
I was on that zoom call and stayed until the end… I think Dante was shocked at the honest live comments from so many advisers! Only genuine thing I heard Dante ever say!
“Nudge” they say? More like a full body slam.
But then when you get supremely vested interests (ie the ALP needing the campaign monies provided by industry funds) then this was always going to be the outcome.
In the meantime I will sit back and await the inevitable Royal Commission into Industry Super Fund failures.
I find it funny that Industry Super funds started advertising compare the pair in retirement. Almost like they knew this was coming………hmmm
It just keeps getting worse!
In my opinion:
Why don’t we just accept that there will never be a level playing field whilst the relationships (and potential conflicts of interest) between legislators, unions and super fund trustees continue to exist.
A national disgrace.
Time for a Royal Commission.
Agree with Royal Commission. Australia’s economy is going down the toilet. I mean ASIC Report 2024 into enforcement & investigation (What happened?), Dixon Advisory and many more and the below. Its mind boggling how you permanently banned a financial planner based on manipulated & incomplete evidence, the truth is the truth:
ASIC should review the case and properly investigate the financial planner they crucified (lost their houses, savings and nearly lost his family and suffered significant distress through this experience until now) for alleged churning of insurance products. Through some bogus complaint (severely manipulated & incomplete misleading information) regarding this financial planner, they alleged the financial planner churned insurance products and put his clients into an inferior product and claimed commissions from it (His superiors received ALL the commissions as per evidence, not him, he was an employee). Turns out, this financial planner had no choice to represent himself at the AAT (no funds to hire a lawyer or barrister, spent $400k), Evidence shows new life insurance products clearly had more features and benefits and monthly premiums was significantly lower and had a reference number before assessment for every single file. Materials was severely manipulated to make it look like this financial planner was a crook. This financial planner had no compliance breaches in the 4 years he was employed, 100 plus good character references from the community and industry & had all the awards, 3 independent experts was hired to investigate the matter and turns out there was no formal / verbal warning of any breaches and other financial planners were doing it and still practising. The transfer form provided was the incorrect form. The correct transfer form was generated after this financial planner left.
Miscarriage of Justice.
It was ALWAYS about giving union super funds the right to “nudge” people. (read – retain FUM).
Why can’t I nudge clients or prospective clients.
The entire thing is a disgrace.