DBFO 1.5 bill ‘falls short’ of government’s goals: SIAA

While the consultation on Treasury Laws Amendment Bill 2025: Delivering Better Financial Outcomes is still open for three more days, the Stockbrokers and Investment Advisers Association (SIAA) has released its submission, which labels the bill a “disappointing outcome”.

Chief among the SIAA’s problems with the proposed legislation, which only partially covered the remaining reform areas, is that client advice record that would replace a statement of advice amounts to little more than a “regulatory obligation to cut and paste a name change”.

“In deciding not to adopt the recommendation to do away with statements of advice but to proceed with an advice record, it is important that the government achieves the important outcome of a principles-based record that is clear, concise, effective and assists the client to make an informed decision on whether to act on the advice,” the submission said.

The SIAA argued that the record should not simply be used to “parrot the client’s objectives, financial situation and needs”, rather it should relate only to the client’s stated advice needs.

“Unfortunately, while there was potential to effect a fundamental change to the advice process, we don’t consider that this change is reflected in the Bill,” it said.

“The Bill falls short of enabling more Australians to receive advice as it merely tinkers around the edges of the existing provisions. It does not deliver on the government’s intent of a clear, concise and fit-for-purpose advice record.

“This is unfortunate because it is unclear when another opportunity to change the advice process will occur.”

Costs for little gain

Adding that its members had conducted a “comparison exercise” between the proposed changes and current requirements, the SIAA said they found “very little change to their regulatory obligations”.

“If the Bill proceeds in its current form our member firms will be required to re-engineer their systems and processes to comply with the change of name from Statement of Advice to Client Advice Record, including changes to their Statement of Advice templates, that is, a regulatory obligation to cut and paste a name change,” the submission said.

“This will result in costs being incurred for very little, if any, gain in effectiveness or efficiency. If our members are required to make these changes, a dividend should be delivered to both advice providers and their clients.”

In a slightly positive note, the submission contended that the member feedback found the client advice record may reduce the length of the document for comprehensive financial planning advice, however even this was couched with a caveat that some information that is removed will still need to be held in the record.

“While this will reduce the length of the Client Advice Record, the Bill essentially ‘reshuffles’ where the information is kept, rather than reducing the work that needs to be undertaken. This is in direct conflict with positions put forward by the financial advice ecosystem during consultations to not simply remove obligations from the Statement of Advice and put them into record-keeping obligations, as this would not be reduction in red tape,” the SIAA said.

“Importantly, our members do not consider that the Bill will reduce the length of the Client Advice Record in any meaningful way for stockbroking and investment advice.”

The submission was broadly in line the Financial Advice Association Australia’s (FAAA) initial assessment of the bill, with chief executive Sarah Abood saying 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.

The FAAA echoed concerns from others within advice on the simplification of SOAs, for which it “had high hopes”.

“Analysing the requirements for the new ‘Client Advice Record’ or CAR, we haven’t found a material difference between these obligations and those for statements of advice, in the legislation,” Abood said.

“We were hoping for a much lower level of prescription, and greater recognition of professional judgement, as well as indications as to how the other areas of prescription (notably the impact of ASIC interpretation) would be dealt with.”

No best interests duty ‘disappointing’

The association also expressed its disappointment that not all of the proposed reforms are included in the bill, particularly the lack of detail around changes to the best interests duty and the safe harbour steps.

“It is difficult to fully respond to the Bill without knowing what the Best Interests Duty will look like, particularly its approach to scoped advice,” the SIAA said.

“Changes to the Statement of Advice provisions are only one part of the process. This is because the scope of the advice that is set out in the Client Advice Record will depend on how the new Best Interests Duty provisions enable the adviser to limit the advice to an agreed scope.

“This will impact the Bill’s requirements that the Client Advice Record includes reasons for the advice, including how it meets the client’s objectives, financial situation and needs.”

Importantly, it noted, any change would also necessitate that Standard 6 of the Code of Ethics “must be removed”.

“The scope of what is required to satisfy the best interests duty under the Code of Ethics will need to be clarified and refined before these legislated changes come into effect. This may impact the transition period of the Bill,” the SIAA said.