DBFO draft won’t go anywhere – and why that’s OK

In a Friday afternoon announcement that caught many off guard, the Labor government and Financial Services Minister Stephen Jones delivered the long-awaited second tranche of the Delivering Better Financial Outcomes (DBFO) reforms – well, most of it.

There were some notably absent measures, namely the controversial introduction of a new class of adviser (NCA) and the evidently thorny modernisation of the best interests duty.

Ultimately, despite having a three-year runway, the retiring Jones didn’t have enough time to wrangle the competing stakeholder interests surrounding the NCAs, nor to deal with reworking a chunk of the notoriously convoluted Corporations Act.

(Wasn’t there a review about that mess?)

What we do have is a client advice record (CAR) to replace the statement of advice (and, yes, replace is unfortunately the best word here) and clearer rules around super funds collectively charging for advice and nudging members at key life stages.

That doesn’t mean the NCAs are off the table and the safe harbour steps will remain – the government wants to consult on these measures alongside the ones that made it into the draft legislation before eventually rolling it all into one.

However, with consultation on the draft open until 2 May, and an election needing to be called by 14 April at the absolute latest, the government has no plans to actually legislate any of this before Australia heads to the polls.

So, why even bother?

Well, as Financial Services Council chief executive Blake Briggs noted in a quick reaction to the announcement on Friday, it’s all about “maintaining momentum”.

It would be fair to quibble over whether “maintaining” is the right verb given the slow rollout, but the point stands.

The draft legislation puts in place actual detail that advisers and other industry stakeholders can dive into and provide their response.

It also creates a level of legitimacy behind the reforms that goes beyond announcements, speeches and vague details dotted across media statements.

Additionally, all those months (indeed, years) of consultation and NDA-protected roundtables won’t be for nought. The last thing anyone wants is for Treasury to have to go through the entire rigmarole a second time.

The government – should it secure a second term – will be providing Jones’ replacement with a platform to secure some of those “quick wins” we heard so much about.

There will be submissions rolling in even after Canberra moves into caretaker mode that will point out the inevitable issues with the drafting and ideas that can be adopted to better reflect the intention of the legislation.

What about a Coalition victory? The result should be much the same.

Jones’ opposite number, Luke Howarth, will have the advantage of a bill with all its flaws highlighted and fixes identified, as well as an opportunity to swoop in and get something finished quickly.

The real shame is that the details around NCAs and the best interests duty can’t be properly interrogated. These areas, particularly the NCAs, are ones where the specifics are vital. Instead, the consultation will have to suffice with the details the minister outlined in December.

Only time will tell how much of this draft legislation makes its way into law, but an open and public discourse on the merits of the measures will, at the very least, give whoever is in charge of getting DBFO tranche two over the line all the information they need to get on with the job.