Last week, in announcing the initial draft legislation regarding the Quality of Advice Review (QAR), Financial Services Minister Stephen Jones said “some” technical details regarding changes to statements of advice (SOAs) and the elimination of safe harbour steps from the best interests duty needed to be resolved before they could be released for consultation.
At the time, Mr Jones clarified that the exclusion of these recommendations from the first tranche of legislation would not delay their push through Parliament but hinted that SOAs would now slot into stream two of the government’s legislative response to QAR.
Providing more clarity on that this week, Mr Jones could not give a concrete timeline regarding the possible tabling of SOAs before Parliament.
“So many of these things are out of my control,” he told ifa.
“There might be another, hopefully, there isn’t, but another unforeseen thing that the whole of government has to focus on which pushes things out of the current queue.”
What the minister did, however, say is that everything is currently “on track”.
“Everything I know at the moment means that we are on track for this raft to be introduced in the first parliamentary session, sort of in the first quarter of next year, plus our next lot of draft legislation out and available in industry in early 2024 and back in Parliament in 2024,” the minister said.
“We’re on track to meet the timelines we’ve been discussing.”
Complexities with SOAs
The complexity of SOAs is that they have tentacles into other areas of advice regulation, according to the minister.
“Every time you think you have something in isolation, like your statements of advice, you realise that the driver of that is the safe harbour test, and the best interest duty which we were always going to deal with in tranche two, and we can’t do one without the other,” Mr Jones said.
“We’re pretty sure we know what we want to do but we haven’t got all detail consulted. In short, every time you pick at this you find there’s an interconnected bit that needs to be dealt with.”
For SOAs to have formed the first tranche of the government’s legislation, Mr Jones said a step in the consultation process would have needed to be skipped.
“What we’ve attempted to do is consult deeply with people on policy design and legislation design, and we would have to have basically skipped a step and didn’t want to do that,” the minister said.
And while consultation with industry regarding SOAs has wrapped up, the minister said he still needs to get the whole government to comply with the changes.
“We’re pretty certain that we know what we want to do here, we’ve then got to make sure that the whole of government is locked in behind that, and then announce what we want to do.”
Despite the myriad complexities, Mr Jones assured that “you won’t have to wait much longer”.
Legislation is not always the issue
Speaking to ifa last week, the chief executive officer of the Financial Advice Association Australia (FAAA), Sarah Abood, said that parts of the Corporations Act that dictate the make-up of SOAs are not “too terrible”.
“What’s in the Corps Act is important and sets the tone, and sets the scene, but the way those laws are implemented is also very important and it’s been observed by many that what’s in the Corps Act currently is not too terrible. When you read it, it seems fair enough, and yet somehow, we’ve ended up with 80, sometimes 100-plus page SOAs,” Ms Abood explained.
Mr Jones acknowledged this on Wednesday and said that while it’s his job to work on the legislation, it’s the licensees’ role to enforce the law and refrain from moving beyond it.
“When licensees come to me and say, ‘Things are broken, we can’t make the system work’, I say, ‘Great, I’m going to work on the [legislation], but you’ve got a big job to do as well because you are the guys that are setting the standard rules, forms, processes to your cohort’,” Mr Jones explained.
“We’re [the government] dealing with the regulators, the licensees, the product manufacturers as a group, and we say to them, ‘You can’t all say there’s a problem, and you want things to change but you won’t change the way you’re doing things as well’.”
The government is consulting on the first tranche of legislation until 6 December. After that’s wrapped up, the minister expects the policy confirmation of the details on SOAs and other elements of the second tranche to be released before Christmas, with further legislation to be put to consultation next year.
Almost 12 month since Michelle Levy handed over the report with zero progress which I’m certain wouldn’t pass the pub test of being “on track and on time”
Whilst I do not agree with excuse’s following the pre-election promises, a major part of this problem is that regulation & process has been allowed to become so complex, so over complicated, so unwieldy, so over regulated & unmanageable in a practical sense, that unravelling a massive ball of knotted & twisted string is unfortunately going to at least take some time.
If previous Govts had not allowed it to become the utter mess that it is, we wouldn’t be in this abominable situation now.
What does he mean “on track and on time”….hasn’t he just admitted that SOA’s and BID are now part of tranche 2, not 1, and they may not even be introduced into parliament by Autumn? I could almost guarantee we will still be writing full blown SOA’s by this time next year.
Tranche 1 does nothing but bring in a consolidated fee consent form as an option, product providers can still make you use their own forms if they want. He’s absolutely clueless, as is every politician that’s ever had their fingers on FS legislation. All he cares about is making it easier for Industry Funds to employ poorly educated Advisers (salespeople) to ensure they retain FUM.
When he mentions “We’re on track”, he is referring to his Dept., Treasury and ASIC, not the Advice Industry specifically excluding advisers. “So many of these things are out of my control,” he told ifa.
Sure MP Jones, what happened to the pre and post election promises of…
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.”
He didn’t say within three months of the election. What he actually meant was within three months of the Industry funds telling him they are happy with what the changes.
That promise is likely parked up with the others his Government made – reduction in electricity prices of $275?
Promises are easy it seems.