Advice reforms an urgent priority

By moving to legislate the reforms in full this year, the government would demonstrate a decisive commitment to improving access to affordable, fit for purpose financial advice and thereby empower millions of Australians to plan with more certainty in these uncertain times.

Not since the COVID-19 pandemic have we experienced such global economic volatility. Australians are feeling the reverberations of President Donald Trump’s tariff wars as they anxiously watch their superannuation balances and brace for more volatility on the sharemarket.

All this as they continue to deal with rising cost of living and a housing crisis that has put buying a home even further out of reach for many.

At a time when Australians most need access to financial advice to make important decisions about their futures, it is harder than ever to access. Since 2019, the number of financial advisers has declined significantly.

While research shows Australians continue to see the value of financial advice, few can afford it with the median ongoing fee now just under $4,000. This has resulted in many working Australians unable to access financial advice, and a growing under-insurance problem that is leaving people exposed when life gets tough.

To navigate uncertain times, laws and regulations not only need to protect consumers, but promote financial empowerment so they can make important decisions about their future before it’s too late. One of the most important assets we have is our income and our ability to generate income.

There are approximately 16,000 financial advisers to turn to across Australia; however, fewer than 1000 are helping people navigate life insurance on a frequent basis.

The number of Australians approaching retirement with complex financial needs is increasing, although many might not have experienced the benefit of financial advice and are discouraged by the cost.

Research by ASIC showed Gen Z are actually engaging more with their finances; however, the cost of advice ultimately limits their ability to access appropriate information and advice to support their long-term decisions.

The government has taken steps to address this with its Delivering Better Financial Outcomes (DBFO) reforms. Implemented in full, they could well be the most positive change to financial services since the introduction of compulsory superannuation in 1992.

However, full implementation means the implementation of two critical reforms: the removal of the safe harbour steps for meeting the best interests duty; and the introduction of a new class of adviser.

The safe harbour’s prescriptive checklist is a series of steps every advice provider must follow to show they’ve met the best interests duty. The safe harbour steps drive up the cost of compliance which is ultimately passed onto customers in higher advice fees. It has also led to expensive, complex and one-size-fits-all advice that is focused on compliance rather than the needs of consumers.

The current compliance-focused regulatory framework deters advice. By introducing the new class of adviser, with appropriate education requirements, superannuation funds and advice businesses can offer simple, safe and effective advice and engage in helpful and informative conversations with their members and clients.

Former assistant treasurer Stephen Jones emphasised the importance of fully implementing the package, stating it “works together to expand access to affordable, quality financial advice”.

It is essential that the new government prioritises these reforms. By removing the safe harbour steps that directly drive up the cost of providing advice and allowing a new class of advisers to give simple and low risk advice, it will ensure a new era of advice that will not only be easier to understand but more specific to the immediate needs of individual consumers.

Importantly, it will allow Australians to plan with some certainty as we all navigate these uncertain times.

Kent Griffin is chief executive officer and managing director of Acenda, formerly MLC Life Insurance.