When Minister for Financial Services Stephen Jones announced the government’s policy stance on the second and third tranches of the QAR, the reaction from the advice community was focused squarely on the new class of institutionally employed financial advice providers – to be termed “qualified advisers”.
However, the process of implementing not only this particular reform but also any of the announced reforms is considerably lengthier than one might anticipate. This is compounded by the fact that, even without considering the government’s delay in reaching this stage, the overall initiation has been notably sluggish.
According to Ben Marshan, the principal at Ben Marshan Consulting and former general manager of policy and advocacy at the Financial Planning Association of Australia (FPA), the legislation may not be in place before the next federal election.
“I’m not a betting man, but if I were to put money on it, I would say we’re looking at July 2025, maybe, and it could be 12 months from there before a lot of this is live,” Mr Marshan said on the Challenge the Standard in Financial Advice podcast.
The latest possible date that a federal election can be held is 27 September 2025, however, it is unlikely that there would not be an election before this point. The half-Senate election, which is generally held at the same time as the House of Representatives election despite not being a requirement, will push this timeframe closer.
The earliest date for a simultaneous election would be Saturday, 3 August 2024 and the latest possible date would be Saturday, 17 May 2025.
Why the delay?
It has now passed the one-year anniversary of the QAR final report, which lead reviewer Michelle Levy submitted to the government on 16 December 2022, and the only measures that have progressed from here are a handful of minor adjustments within the Delivering Better Financial Outcomes – reducing red tape and other measures draft legislation.
“I would say that it’s going to take 12 to 18 months from here for most of [the recommendations] to be consulted on and drafted into legislation,” Mr Marshan said.
“It is then going to go through a parliamentary process, which is going to take six months, and it’s then going to take 12 to 18 months after it’s passed Parliament to actually become the new law, and the new advice process.
“The reason for that is what the government will likely do now is they will say to Treasury, ‘OK, we made a decision around what direction we will go in. So we need you to draft legislation based on Michelle’s report, our response, some of the conversations we’ve had’. For some of them, Treasury will go, ‘Yep, we can do that’.
“The first tranche of changes already came out because they were confident they could draft the legislation based on those. But the stuff around superannuation, insurance and banks coming back into providing advice, that needs a lot of thought about how you do that.”
He added that hammering out the details around “qualified advisers”, such as the specifics of education requirements and the advice processes to be put in place, will require a lot of further consultation.
“In February or March, you might see some consultation papers. They’re going to have two-to-three-month consultation periods,” Mr Marshan detailed.
“They’ll then take all those responses, draft up the legislation, put that out for consultation; there will then be responses back, which might be the end of it. They might be ready at that point.”
He added: “Let’s say that they’re ready at that point. They then have to finalise the legislation. It then has to get through the party process of the Labor Party to be introduced to Parliament. And then, it goes through the whole parliamentary process. That will usually take six months. So that part of the process will probably be about a year from when they are ready.”
The upcoming election poses further issues in terms of government priorities and legislation that will come out of an election budget taking precedence over advice reform.
“There’s going to be a lot of legislation that’s likely to be created from that and talked about because they’re going to want to sweeten the deal for the voters and make themselves as attractive as possible for re-election,” Mr Marshan added.
Getting through legislation also isn’t the final step, as there will also be input from the regulator.
“Once it gets through Parliament, there will likely be some parliamentary inquiries in Parliament,” he said.
“That’s done, but the law is usually a third of how it actually works. You then have the regulations and the regulatory guidance that the regulator will provide, so ASIC, in this case, has to go through a consultation period. So, that usually takes 12 to 18 months by the time they add an implementation period.”
Following the release of the first draft legislation in November, Senator Andrew Bragg took aim at the slow pace from the government and highlighted the likelihood that there would not be any major changes before the federal election.
“Releasing a draft bill at this stage of the term means there will likely be no substantive financial advice reform passed in the life of this Parliament,” he said.
“If Labor was serious about cutting red tape from financial advice, they would prioritise implementing the recommendations of the Levy review, in full.”
Probably right, but the only thing that makes me hopeful that it might be done sooner is Stephen Jones is [cynically] tying any reduction in red tape for financial adviser to making it easier for their backers (ie Industry funds and banks) to provide financial advice without actually having to employ professional financial advisers.
The final QAR report may not have been released until a year ago, but Jones’ election promises about fixing the “hot mess” with some “quick wins” happened about two years ago. Jones has been in office for over 18 months has delivered absolutely nothing to fix the hot mess. He has used QAR as an excuse to delay and avoid any meaningful action.
Can we please stop talking about QAR as the solution. The main solutions have been obvious for some time, regardless of QAR. There are also some obvious fixes that aren’t even covered by QAR (eg fixing the unworkable Code of Ethics).
The solution we really need is a competent and diligent minister who will actually implement some quick wins to fix the hot mess. Jones is not up to it and must be replaced.
Useless Canberra, delays, more red tape and Nothing to help Adviser provide Advice.
Typical USELESS CANBERRA !!!!!!!!!!!!!!!!!!!!!!!!!
“If Labor was serious about cutting red tape from financial advice, they would prioritise implementing the recommendations of the Levy review, in full.”
June 3, 2022 – “New Financial Services Minister Stephen Jones says he will prioritise easing the regulatory burden on financial advisers within three months, to stop the exodus of professionals and make advice more affordable for consumers.”
To further expand on the above – can anyone explain in very simple terms why after 19 months as Minister for Financial Services, Stephen Jones still hasn’t fixed the FDS Consent?
When the next election rolls around and you are in the ballot box, never forget the above.