How can advisers prepare for DBFO reforms now?

More than two years on from the Quality of Advice Review (QAR) being handed to the government, the estimated timeline for tranche two of the Delivering Better Financial Outcomes (DBFO) legislation remains unclear, as was pointed out by Liberal senator Andrew Bragg during a Senate estimates hearing on Wednesday.

Despite hopes of the legislation being passed before the next federal election, Conrad Travers, director and principal consultant at Tangelo Advice Consulting, said there are three areas where advisers can start to prepare for the expected changes, the first of which regards statements of advice (SOA) potentially transitioning to a fit-for-purpose advice record.

“To be honest, most businesses have the opportunity to change their SOA template now. There’s nothing in RG90 that means you can’t simplify your advice document,” Travers said.

“By the way, [the Australia Financial Complaints Authority] has said they want simple advice documents. I would encourage people to think about, if this is when legislation gets drafted and this is when it gets presented to Parliament and this is when it goes to the Senate and this is the transition period, it’s going to be a long time before it actually comes in.

“So, do you want to control your own destiny and generate some efficiencies in a much shorter or simpler document now? There’s an element of not waiting and actually just driving your own agenda based on what you can control.”

Qualified advisers

While recognising the severe backlash that followed the introduction of the “qualified adviser”, Travers argued that if you put the naming of that aside, the new class of advisers present an opportunity rather than a threat to the profession, depending on how they function.

“Think about the fact that we can’t really solve advice access without looking at superannuation funds, in my view. Now how we do that is the key question,” he said.

“I know that it doesn’t include, for example, they can’t charge fees and that the licensee, which would be the super fund, is actually liable for the advice. How they scope would be a really important question for me.

“I’d be encouraging them to look at scoping on a strategy level rather than a product level. I think product level scoping is a problem when you think about insurance and super and how intertwined they are.”

Furthermore, Travers said it could be an opportunity for super funds to not only expand their offerings but also “build a connection and a relationship with holistic advisers who may be able to get referrals on the back of that as well”.

Best interests duty

Finally, Travers explained that the introduction of a modernised and flexible best interests duty and subsequent removal of the safe harbour steps could be rather impactful for the advice profession.

“I actually think this is a bigger change than what people have said, because at the moment, we have these seven steps, safe harbour steps that don’t bear a lot of connection to reality in terms of how a conversation actually happens with a human,” he said.

“What it led to was people failing their audits if they didn’t follow a certain process step when the overall advice was sound. Now, that can’t be the case.

“Like if you get to a great outcome for a client, not that it doesn’t matter how you get there, like scoping and things like that are really important, but I think we too far went down that view of like step one, step two, step three, when in reality, advice is more complex than that.”

Travers said this will be an opportunity for licensees to “support advisers to be professionals and use their professional judgement”, as it will be an exercise for advisers in showing what they did and why.

To hear more from Conrad Travers, tune in here.