There are a few things that operate as envisioned in a perfect world. Australia’s political system is no exception.
Elected officials working to best represent the wishes of their constituents – some might say in their best interest – is hard to argue with as a concept.
The practical application is where things fall apart as vested interests and plain, boring, old disagreement take over and stall progress.
This idea is perhaps best summed up by former UK prime minister Winston Churchill, who is famously quoted as saying that “democracy is the worst form of government – except for all those other forms that have been tried from time to time”.
It would be great if everyone could just agree on a path forward and implement it in a timely manner, but that’s not the world we live in.
So, what exactly does this mean for advisers?
Last week, political fighting in the financial services portfolio ramped up as shadow treasurer Angus Taylor and shadow financial services minister Luke Howarth took aim at an “embarrassing blunder” in the Quality of Advice Review bill in a joint statement, and labelled the government “asleep at the wheel”.
What followed was a litany of accusations and recriminations over the government’s implementation of the QAR recommendations and the general handling of the financial services sector, culminating in Howarth emphatically stating that it’s “time Stephen Jones steps up or steps aside”.
Expectations v reality
The sentiment is not one unfamiliar to those keeping an eye on the comments section of ifa, with many commenters expressing dissatisfaction (to put it mildly) in Minister Jones.
Often, when it comes to politicians, this is the default setting for a section of the public, however, in the case of the current government, the vitriol is largely due to a misalignment between expectations and reality.
Nothing is ever consensus, but it would be fair to say the broader advice profession was aligned against the Coalition heading into the last federal election in May 2022.
Throughout nearly nine years in government, and three different prime ministers, the Coalition oversaw a range of reviews and changes to the financial services sector that have since resulted in a precipitous drop in the number of advisers still working in the profession.
From the Financial System Inquiry (FSI) to the financial services royal commission and the Quality of Advice Review (QAR), the sector has been reviewed to death as fewer than 15,600 remain.
When Labor was on the campaign trail, Jones vowed to fix the “hot mess” that is financial advice, and a lot of talk was had about what would happen in Labor’s first 100 days in office.
Instead, six long months separate Michelle Levy handing over the QAR final report and the government providing a response in June 2023. It wasn’t until November that an exposure draft for the first tranche of legislation was released, and December that the rest of the reforms were detailed.
That December announcement is now infamous, for it was the first time Jones used the term “qualified adviser” to describe institutional advice employees. Needless to say, it became fuel to the fire of adviser discontent.
On top of this was an unfreezing of the ASIC levy, more than doubling the cost from $1,142 per adviser to $3,217 per adviser.
The $400 reduction that came months later did little to ease the pressure, particularly when it was followed by the announcement of a new levy – $1,186 per adviser to fund the Compensation Scheme of Last Resort (CSLR).
Far from shying away from the impact it will have on advisers, on Monday, Minister Jones commended the Albanese government for its efforts towards “strengthening the financial system to provide victims of financial services misconduct with access to redress and compensation”.
Lose-lose?
The results of the last decade of regulatory tinkering from both sides of politics leave advisers with a conundrum ahead of the federal election, likely to be held in May 2025.
The delays and extra costs from the Labor government have done little to inspire confidence, but when playing the blame game, it is easy for all involved to gloss over their own contribution to the mess.
The truth of the matter is, regardless of which party was in government, the ASIC levy would have increased. The model was already in place and the freeze was always meant to be temporary.
Similarly, the process to institute the CSLR framework was kicked off under the Coalition, though the implementation timeline conceivably could have been radically different and not included the retrospective element.
Last week, Association of Independently Owned Financial Professionals executive director Peter Johnston noted that while the AIOFP strongly backed the ALP ahead of the 2022 election “for good reason”, the Liberal Party has “recently acknowledged their past mistakes and are willing to work with the advice community in a positive manner”.
The question is whether this is just talk or if there really has been a shift in thinking. Would another change of government speed things up, or would there just be another 12 months of a fresh government getting things in place?
Conversely, would continuity in government allow for measures already on the table to continue at pace?
In the end, there might not be a winning horse for the advice profession.
At the moment, the Coalition has promised very little to advisers for the next election, apart from an admission in Hansard that the operating costs for a retail adviser to run their business is between $100k to $200k a year, before a cent in salary is paid to any staff or directors. Also, the Coalition appears committed to unlock SGC super for young home buyers. At least that way, those Industry Super fund members will stop paying intrafund advice fees for “advice” they have never received & for fees they have never consented to at any point.
I think it is a loss for every Australian if Labor get back into power.
VOTE TEAL
ironically, I suspect the TEALs would love to get hold of that Industry Super FUM and invest it all on renewables and affordable housing. Get the popcorn.
The whole of Canberra, Pollies, ASIC, APRA, FARSEA, Treasury, Bureaucrats in general all deserve to be Shirt Fronted.
Congrats Canberra on the Advice Gordian Knot of mass useless over regulation and costs.
Congrats Canberra on the Advice Hot Mess of mass useless over regulation and costs.
Canberra should sack itself.
When the bad legislation of a previous government leads to adverse outcomes under a new government, the correct response is not to wave it through anyway and blame your predecessor. The correct response is to fix the bad legislation.
Labor should have intervened to stop the ASIC levy increase and CSLR. They chose to do nothing, because it suits the interests of Labor’s union super masters to destroy professional advice.
Treasury has been the problem child for Financial Services for decades.
Their intervention is consistently problematic and they harbour an inherent dislike and disdain for Financial Advisers….it is very clear.
The power they wield over legislation with no experience or real understanding of the everyday process or the operation of small or medium sized Financial services businesses is negligible or non-existent.
They are invisible and are the enemy and seem to be answerable to nothing.
It is a disgrace.
Until the Annual Fee Renewal Consent Forms are gone (that simply do not exist in any other nation on earth), service support levels for consumers will continue to fall and the waiting list to access good retail advisers will continue to grow. This is a legislative debacle for consumers.
Minister Jones and Michelle Levy both had the right intentions and aims and were looking to provide good outcomes. The problem is that the bureaucrats in Treasury and ASIC want to over complicate everything for “fear of being wrong” and turn good intentions into flawed legislation.
If they took notice of those at the coal face rather than special interest lobbyists we could have the legislation the industry deserves.
Levy did not change her stance from interim to final, Jones failed to implement and when he and his team did it was rude with school boy errors which would decimate the general advice industry. Voluntarily off their own back, ignoring all stakeholders in consultation. That’s uniquely incompetent
Quite day – nothing story
Quiet*