‘Blessing in disguise’: Is a DBFO tranche 2 delay better for advisers?

The government’s slow progress on advice reform has been consistently criticised dating back to the amount of time it took to respond to the Quality of Advice Review (QAR) final report. However, Association of Independently Owned Financial Professionals (AIOFP) executive director Peter Johnston said the latest delays could be a positive for advisers.

In an email to members, Johnston said that significant movement on the next package of Delivering Better Financial Outcomes (DBFO) reforms “now seems highly unlikely” before the upcoming federal election.

“A combination of the government having bigger issues (in their mind) to contend with, the likelihood of an April 2025 election and the recent spate of poorly drafted financial services legislation by Treasury bureaucrats has relegated DBFO tranche two way down the list of priorities,” he said.

Last week, Financial Advice Association Australia (FAAA) chief executive Sarah Abood flagged that it felt like progress had “stalled” on tranche two, though did note the FAAA has had some informal meetings with Treasury.

“What we have been advised is that formal consultations are due to take place shortly, and the intent is that we will see legislation for tranche two. Originally, it was around the year, and that date’s been drifting a bit,” Abood said.

“We’re now sitting in August; I don’t think we can say it’s the middle of the year anymore. The last statement we heard from the minister, I think, was this calendar year. We will have some roundtables and some formal consultation before that, though, because there are some matters in this legislation that will be quite tricky to solve.”

While much of the focus has been on the proposed creation of a new class of adviser, and the poorly thought-out “qualified adviser” name, other measures that have been more well received by the advice community include streamlining statements of advice, removing the safe harbour steps and modernising the best interests duty.

In the email to members, Johnston added that the AIOFP expects to disagree with some aspects of DBFO tranche two, making the deferral “timely and in the best interests of consumers”.

“What has not helped its cause is the inept handling of the financial advice agenda, in general, over the past two years where the cost and complexity of advice has increased for consumers, not decreased as originally promised,” he said.

“We can only conclude the government does not want to risk another financial services controversy ‘own goal’ leading into the election.

“This outcome, however, is a blessing in disguise.”

The AIOFP has continually argued for greater lobbying among the advice community to put pressure on politicians, including a renewed push for its marginal seat strategy last month.

According to Johnston, the delay will also help advisers on this front.

“The incompetent/biased Treasury bureaucrats’ influence will now be diluted leading into the election by politicians eagerly wanting to please advisers and their clients to retain their seat or power,” he said.

“The best outcome for the advice community and consumers is a bipartisan agreement on the major issues before the election and therefore out of reach of the Treasury bureaucrats’ influence.

“We hope the next minister will take a more hands-on active approach by delegating experts from the financial advice industry to consult on legislative content and implementation. The recent opinion expressed by Bernard Quinn KC of the 99FA Legislation highlighted the incompetence of Treasury bureaucrats and why practicing advisers and KC’s views should be pursued before legislation is presented to Parliament.”

In order to push this message, Johnston said the AIOFP would invite “backbench politicians from all sides of politics” to the association’s conference dinner at Parliament House in November.

“The AIOFP will present what needs to be done to reduce the cost of advice, the politicians will not be required to speak but can ask questions if they wish. It will be an educational-themed approach to ensure politicians understand what the real issues are and how they can be rectified,” he said.

“We will be specifically inviting all politicians from all the marginal seats who should have an intense interest in issues that concern their constituents leading into the election. This cohort of politicians are the most vulnerable and therefore most vocal with ‘head office’ at a time when both sides cannot afford to lose marginal seats, and their personal future is on the line.”