‘Policy intent will not change’: Jones details future of DBFO post-election

Prime Minister Anthony Albanese’s imminent federal election decision, which according to some corners could be as soon as Friday, will push the government into caretaker mode and put an end to any bills that were not passed during this term.

On the financial advice side, this means that the exposure draft for the next package of Delivering Better Financial Outcomes (DBFO) reforms, released on Friday afternoon, will never make it through Parliament.

However, speaking on an FSC post-budget webinar, Financial Services Minister Stephen Jones explained that part of the impetus in releasing the draft so close to an election being called was to make sure DBFO didn’t “lose momentum”.

“I’ve made no secret of my frustration about bottlenecks inside [the] legislative drafting process, I wanted the draft [legislation] earlier, and I would have preferred that the other two bits around new class of adviser and best interests duty had been included in this package,” Jones said.

“I had a choice about, do I wait, or do I get the stuff out that is complete and get people poring over that. I took the choice to get as much out as we possibly could, and I did that for two reasons – if I get it out before caretaker, our colleagues inside Treasury can continue the work and the consultation process on that together with the unfinished bits.

“And it’s about momentum. I don’t want to lose momentum. I have personally invested four years in this … I want to ensure the momentum is not lost.”

With the minister previously announcing that he would not contest the next election, he also sought to reassure financial advisers that a re-elected Labor government would be committed to advice reform regardless of who sits in the minister’s chair.

“This is the policy not of Stephen Jones, this is the policy of the Albanese Labor government. This has all been through cabinet processes, and I was very, very adamant that we needed to ensure the whole government was on board with this project,” Jones said.

He added: “Whoever sits in my job in two months’ time, if it’s the Albanese Labor government, this will be the policy. And more to the point of us not losing momentum, let’s use this two-month gap that we’re going to have to get as much of the policy work done so that whoever sits in my chair, if it’s a Labor assistant treasurer, minister for financial services, they’ll have a package ready to go. The job is to then just legislate it and get it through Parliament.”

Importantly, Minister Jones said, the government believes that this latest draft legislation “reflects the policy intent”.

“If there needs to be some fine-tuning on that, if there are unintended consequences in there, of course, we’ll work through that. Of course we will, but the policy intent will not change, ensuring that the [legislation] matches up to that is what we need [stakeholder’s] input into.”

FAAA criticism

In the most comprehensive response to the draft legislation so far, the Financial Advice Association Australia (FAAA) made no secret that it was disappointed in where the reforms have landed.

In a statement last week, the FAAA said it would “continue to analyse” the legislation and engage with members to deliver a formal submission.

However, chief executive Sarah Abood said the FAAA “cannot support it without substantial change”.

“This is a pretty disappointing outcome considering the large amount of time and resources that have been invested over three years to finding ways to deliver high-quality financial advice to more Australians,” Abood said.

What most concerned the FAAA, she added, was that the draft legislation would allow for the collective charging of retirement advice from superannuation funds.

“Our single biggest concern in relation to the draft legislation is that it appears to give super trustees the ability to collectively charge for comprehensive retirement advice,” Abood said.

“This is concerning on many levels. Firstly, the cost of collectively charged retirement advice is likely to be very much larger than the cost of collectively charged intra-fund advice.

“Thus, members of these funds will be paying much higher amounts for advice they are not actually receiving – including members who have sought, and paid for, their own personal financial advice but must still pay for the collectively charged advice provided to other members of the fund on top of that.”

The FAAA also pushed for clarity on who within a super fund will be able to offer this level of advice, specifically whether it would apply to the still undetailed new class of adviser (NCA) or only qualified professional financial advisers.

Responding to these concerns, Minister Jones said he wanted to be “very, very clear” that the role of NCAs would be to “provide advice on retirement in relation to the person’s interest within funds”.

“I can categorically state that this is not some backdoor attempt to have new class of advisers providing a full range of comprehensive advice on all things financial. That was never the intent. It wasn’t what we announced, and it’s not what we intend to do,” he said.

Additionally, he stated that collective charging for complex retirement advice is also not what the government intended.

“Through the Treasury consultation processes that can be fleshed out. Let’s bear in mind those broader trustee obligations still pertain – the best financial interest duty to solve purpose test. It’s not the case that this person is going to be able to provide full-blown advice on all matters retirement that have nothing to do with their interest in the fund,” Jones said.

While the minister made it clear there would be no ability for the advice to go beyond a member’s interest in the fund, it is unclear if this assurance would be enough to ease the FAAA’s concerns.

The association has maintained a staunch position that “retirement advice should only be offered by licensed professional financial advisers”, including advice on retirement income products within super.