Treasury needs to stop ignoring advice professionals: AIOFP

The 48th Parliament will finally get underway on Tuesday, and the Association of Independently Owned Financial Professionals (AIOFP) has outlined a set of “critical concerns” for Financial Services Minister Daniel Mulino as he takes over the role.

In a letter to Mulino, seen by ifa, AIOFP executive director Peter Johnston said that “bureaucrats and politicians have traditionally ignored the advice profession when the critical decision-making stage on policy direction is decided”.

Increasing adviser involvement in the process is among several recommendations the AIOFP put forward to “improve the advice profession for all stakeholders and in particular consumers”.

According to Johnston, there is a heightened level of confusion and concern among advisers about their “professional future” following what he referred to as “three decades of poor government and industry association decision making”.

Beyond the impact on advisers, he pointed to the detrimental impact that the period has had on consumer outcomes, which has continued with the “highly regrettable” unfolding disaster of Shield, First Guardian, and Venture Egg.

“The advisers involved are an absolute minority and are not representative of the profession,” Johnston said.

“It goes without saying, the guilty advisers involved should be banned or jailed wherever appropriate. We will encourage all advisers going forward to report any future suspicious activity to ASIC, there must have been some early red flags somewhere to raise initial concerns about the Shield activities.”

However, he pointed to the Future of Financial Advice (FOFA) period as one in which the “government got it right”, adding that Mulino’s involvement gives the AIOFP “confidence that the right decisions will be made under your stewardship”.

Speaking on The ifa Show in May, Financial Services Council (FSC) chief executive Blake Briggs also argued that Mulino’s involvement in the process has the potential to positively influence his approach to current reform efforts.

“Dr Mulino is a great choice for the role, so he’s received broad industry welcome and support, including from the Financial Services Council,” Briggs said.

“I’ve had the pleasure of working with Daniel for quite a long time. I first met him when he was a staffer under Bill Shorten working on financial services and tax policy issues, and so his knowledge and experience of the industry is very deep.

“Now, don’t get me wrong, a lot of people in the advice community would remember that Shorten period as the period of FOFA and that might bring back a bit of PTSD and shock, but the reality is, I think Daniel, during that period, was one of the really sensible policy heads in that office and did a lot of good work with all the organisations that were involved in some of those debates.”

‘Potential to destroy the advice profession’

How this current range of reforms on the new minister’s desk are dealt with, Johnston stressed, will in large part be down to the inclusion of advice practitioners in the process.

“The other option has clearly not worked,” he said.

“We suggest a representative from the four advice-focussed associations are on a committee with ASIC and Treasury to decide policy - FAAA, AIOFP, SMSFA and Stockbrokers & Advisers. We think it makes sense that policy practicality and relevancy need to be tested before market release.”

In terms of the most pressing issues that Johnston outlined to the minister, vertically integrated business models was high on the list, with the AIOFP stressing that “advisers cannot be product manufacturers”.

“It is a profoundly conflicted position under the current best interests duties obligation,” Johnston said.

“The latest product/advice failures like Dixon/Shield have been instigated by advisers getting out of their depth with knowledge/experience/poor ethics/capital requirements, the opportunity to engage with product manufacturing activities for this cohort must end to protect consumers.”

Relatedly, he argued that the managed account asset allocation process must be outsourced to external professionals “unless the adviser can justify their skills”.

“The majority of advisers are strategists and general practitioners, they are not asset consultants and/or investment specialists,” Johnston added.

He added: “The CSLR issue is front of mind to most advisers. Besides for the unfair treatment of advisers funding product manufacturing inefficiencies, if the above educational requirements are not deferred the many thousands departing the profession on 1/1/26 will impose a greater cost on those who remain with proportional CSLR liabilities.

“This scenario can and will induce a spiralling departure from the profession and, for very obvious reasons, stop any new recruits from joining the industry. It is a spectacularly damaging accident waiting to happen in our view.”

Extending the education deadline of 1 January 2026 and increasing the life insurance commissions cap brought in under LIF remained hot-button issues for the AIOFP, having pushed for both in the lead-up to and in the wake of the federal election.

“Minister, we are greatly concerned that these issues have the potential to destroy the advice profession and severely affect consumers, we urge immediate action with at least confirming the educational conditions/requirements and readjusting the structure and intent of CSLR,” Johnston concluded.