‘We need more action’: First DBFO bill not enough

Last Thursday, the first Delivering Better Financial Outcomes (DBFO) bill passed through both the Senate and the House of Representatives, ushering in the first reforms off the back of the Quality of Advice Review (QAR).

Speaking with ifa after the passing of the bill, James O’Reilly, founder of Northeast Wealth, said he is glad to finally see solid action towards bettering advice.

“Above all, I’m pleased that action has finally commenced to address the important points raised in the Quality Advice Review. I’m hopeful that some momentum may be maintained to address the recommendations which will have a meaningful impact on making advice more accessible to Australians,” O’Reilly said.

“Our practice and the broader profession will benefit from streamlined ongoing fee consent requirements, which is a genuine win. Our profession also benefits from more clarity around the delivery and remuneration of personal insurance; hopefully we will see more entrants into this space given Australia’s collective underinsurance challenges.

“And despite the exhaustion of s99FA, requiring advisers to have given sufficient thought to advice fees being charged through superannuation will raise the bar in advice – which we should all encourage.”

Matt Hale, managing director at Rising Tide Financial Services, told ifa that he was “always prepared for the worst-case scenario” when it came to legislative changes, but is hopeful that the new reforms will bring necessary changes for the profession.

Overturning s99FA

Hale, like many others, has praised the overturning of the proposed changes to section 99FA of the SIS Act, stating that the lack of clarity in that area would have been cause for considerable concern.

“I know that, particularly inside Canberra, they were very confident in saying that there wouldn’t be additional work required or additional risks. For us, for trustees and clients. And now that it’s been overturned, I think that’s a very commonsense outcome. It gives us some confidence moving forward,” Hale said.

“Anytime it comes down to interpretation, that’s just not where I’m comfortable. And that ambiguity leads to a level of uncertainty and stress, even if it never comes to fruition.

“For us now, to have a bit more certainty around the written word means that it can only be interpreted one way, hopefully.”

Hale added that while, “in a perfect world, it would have been done earlier”, the fact that it was changed at all is a “really good reflection of the lobbying, on everyone pulling together, to get to the right outcome”.

“I think in this regard, take the wins, be happy with it, and also have some confidence for the future that the industry can pull together and advocacy can lead to good outcomes,” he said.

O’Reilly praised the efforts of the advice profession and their ability to band together to ensure the proposed changes to section 99FA were amended.

“It comes as a great relief. I’m coming up on 15 years as an adviser, and it’s at times felt rare for common sense to prevail. Our profession hasn’t enjoyed many ‘wins’ over this time, and we should be proud of our ability to enact this change through engagement and applying a healthy level of pressure,” O’Reilly said.

“Make no mistake – these changes were the product of our profession mobilising and serve as a timely reminder of what we can achieve when we work together.”

Second tranche blues

With the first tranche of the DBFO reforms passed, the profession now looks to the future, however, Minister Stephen Jones said in a statement shortly after the passing of the bill that the next tranche will be developed over the next six months.

In consideration of this, O’Reilly said that the timeline is “not acceptable”.

“Whilst I welcome progress, the first tranche amounts to some ‘low-hanging fruit’, which is unlikely to enable meaningful bounds in the quality or affordability of advice,” he said.

“Given the timelines that we’ve experienced to date, it’s hard not to have some cynicism when imagining the likely date tranche two may be legislated – and especially given the comparative complexity of the expected T2 content versus T1.

“Michelle Levy’s recommendations in the QAR were, for the most part, measured and rapidly enforceable. The fact that we’ve made so little progress 18 months following the delivery of this report – which speaks clearly to improving Australians’ access to advice – is deeply concerning. Put simply, we need more action and we need it now.”

Hale said that given the amount of time the first tranche took to legislate, he does not expect it will come any time soon, particularly as the government prepares for the federal election next year at the latest.

“Given that it’s an election year, I think it would be fanciful to take it to the bank that it’s going to happen. So much can change when an election is on the radar, things get lost in Canberra,” he said.

“So for me, we’ll have that as a ‘nice to have, if and when’. But up until that point, we will definitely just keep doing what we’re doing and focus on how we can improve our cost to serve and our efficiencies. And if that pops up down the track, then we’ll tackle it and celebrate it and implement it.”

Hale explained that, when it comes to legislation and reform, he tends to not set his expectations too high.

“My firm belief in life is that nothing is as good as it seems or as bad as it seems. And I’ll tackle this exactly the same way,” he said.

“When it comes to this stuff, I have low expectations. And then anything positive is something we can celebrate. So let’s see how the implementation goes, if it lives up to these expectations.”

Praising the profession

Hale praised the advice profession and all it has managed to achieve through collective effort and collaboration.

“A big pat on the back to the industry. It’s really positive and refreshing to say that everyone’s been able to pull in the right direction. It’s really good to see everyone come together,” Hale said.

O’Reilly added: “I’m uplifted by our profession’s achievements in getting s99FA amended and have increased confidence that we can deal with any consequential points when the draft legislation is released. So, let’s get to that point as quickly as possible.”

While he also praised advisers for working together, he said he had hoped for more. Referring to a petition aimed at raising awareness of the rising costs and excessive red tape within advice, he said that he had hoped for greater action from his peers.

“With all of Australia’s 16,000 advisers being affected by s99FA and CSLR, I’d hoped that the signature numbers would skyrocket – but at time of writing, we have only 1,900 names. This means that there are perhaps thousands of advisers that saw this and didn’t sign, let alone circulating it to their friends, family, clients, referral partners etc,” O’Reilly said.

“This said, we’re a resilient lot and for those still in the game, it’s likely you’ve decided to hang around. I hope that this experience will hearten the ‘silent majority’ and encourage more resolve when we need to enact change. Together we can!”