Is Jones’ draft law truly a boon for advisers?

In early September, Parliament enacted the experience pathway legislation, which qualifies an adviser as having satisfied the educational prerequisites if they have 10 years’ (cumulative) experience providing advice between 1 January 2007 and 31 December 2021, along with an unblemished record.

Speaking at a media briefing on the first tranche of legislation in relation to the Quality of Advice Review (QAR), Minister for Financial Services Stephen Jones addressed the exodus of advisers over recent years and whether recent government intervention could help replenish the industry.

“I think we’ve stemmed the massive bleed,” Mr Jones said.

“I think some of the stuff we’re doing here around red tape will make a meaningful difference.”

The government released the first tranche of draft legislation for its Delivering Better Financial Outcomes package of reforms on Tuesday – a package aimed at reducing red tape.

The initial draft legislation adopts around half of the recommendations of the Quality of Advice Review, including recommendation seven which clarifies that funds are allowed to pay a member’s financial advice fees from their superannuation account, recommendation eight which consolidates different ongoing fee consent documents into one simplified document, and recommendation 10 which allows more flexibility in how financial services guides are provided.

Also included in the first batch of draft legislation are recommendations 13.1 to 13.5 which clarify that monetary or non-monetary benefits given by a client are not conflicted remuneration and recommendations 13.7 to 13.9 which introduce written consent requirements for consumers before they purchase an insurance product that will result in a commission payment.

However, while the minister is convinced his red tape reduction agenda will make a “meaningful” difference in freeing advisers from the regulatory purgatory they’ve endured for years, the industry isn’t convinced.

Namely, it’s most worried about the absence of recommendation nine which advocates for the substitution of the lengthy and legalistic statements of advice (SOAs) with a financial advice record for consumers that is more fit for purpose. It’s this recommendation that was expected to make the biggest difference to advisers by introducing less prescriptive means to document an adviser’s recommendations.

But while Mr Jones assured legislation on changes to SOAs is a matter of “how” rather than the “if”, the industry is concerned this first tranche of reform is a missed opportunity.

Qualifications next on the list

Also on Monday, the minister reiterated that once he has “nailed” the advice piece, he will “come back” to the qualifications piece.

Namely, what the minister plans to do is turn his attention to a new entrant pathway – a pathway that has been in discussion since 2021. The new adviser pathway and the experienced adviser pathway have been closely linked since the previous Liberal federal government issued a consultation in December 2021.

But while both the previous government and the current Labor government have consulted on the pathway, there’s been no meaningful movement on the new entrant front.

“That’s relevant as well,” Mr Jones said of the new entrant pathway on Monday.

“Whenever I go into a meeting of advisers, and I’ve done dozens of them, the first question I ask them is, ‘How did you become a financial adviser and what were you doing beforehand?’ And I can tell you none of them said, ‘At the age of 18 I decided I wanted to be a financial adviser so I enrolled in a financial advice degree at a university’. None of them. They all say, ‘I was interested in commerce, I did a commerce degree’ or ‘I did accounting’ … that says to any rational human being we’re trying to force everyone down one pathway but that’s just not how entry points are working in the industry,” Mr Jones said.

“We’ve got to look at a more pragmatic approach to this.”

Last month, in an exclusive interview with ifa, Mr Jones said he believes a pathway into advice for those studying across other areas of financial services could be key to lifting new entrant numbers.

For more insight, watch ifa’s interview with Minister Jones here.