The financial advice sector was largely disappointed in the slow process of the Labor government and former minister Stephen Jones in advancing the Delivering Better Financial Outcomes (DBFO) reforms, with just the first tranche being passed and half of the second being released for consultation just ahead of the election.
Following Labor’s substantial victory at the polls, the job of finalising the process that began with the Quality of Advice Review under the previous Coalition government falls to Minister Mulino.
Speaking at a Financial Services Council (FSC) event on Wednesday morning, the new minister acknowledged his predecessor’s work on advice reform, calling the passage of the first tranche a “big achievement by Stephen Jones”.
“I also want to acknowledge that there was a tranche of exposure draft legislation was put out for consideration between March and May, and what I’m working to do is to get the next piece of exposure dropped out as soon as practical, and that’s not going to be the next few weeks, because it is a complex piece of work,” Minister Mulino said.
Having met with a range of stakeholders over his two months in the job, he said the feedback is that it is difficult to “fully digest” that draft legislation until they see how the elements from the final stage will work together with what has already been announced.
“I certainly don’t want to delay this. I’m looking to work on this as a real priority, and this is one of my top two or three priorities at the moment, but I’m also conscious that it is complex,” Minister Mulino said.
“I’m conscious that there are a wide range of views and I totally acknowledge and thank all the various players for trying to find the maximum overlap, the maximum area of consensus possible.
“But I’m also conscious of the detail matters in an area like this. I want to get this right, but the next step will be to put out the disclosure legislation on what you might call 2B, so that people can then fully digest all those elements deeply.”
Financial advice needs a ‘healthy pipeline’
Minister Mulino also noted he wanted to be clear that “Australians having access to high-quality advice is something that I see as very important”, while acknowledging that there have been several challenges that have led to adviser numbers dropping.
“The reduction in the number of advisers over recent years … is a matter of concern to me, because we know that at the same time that that’s happened, the number of Australians at retirement has increased, and that’s going to continue,” the minister said, adding that he wants to “talk to the adviser community about how we can deal with that”.
“I know that there are some issues around the professional pathways, which are really important, and so I think that’s part of what we need to get new advisers. We need that pipeline to be healthy. That’s something I see as really important.”
Turning to the expansion of financial advice beyond the “full-fee, sophisticated advice model”, Minister Mulino said there needs to be an acknowledgement that this isn’t always needed for every client.
“There are many, many instances where people on lower balances, for example, or people at various points in their life, might need something different to a full advice offering.”
“They might need, for example, a nudge to get out of a product which is inappropriate for them, or they might need very simple guidance on what their next step might be, or what they should consider. I think we need to have a system where people can potentially reach out to or be reached out to by a service provider in ways that have guardrails, appropriate guardrails, but that don’t need them to be paid huge fees.
“Now, I don’t see that as undermining the advice model, because I think there is going to be a growing number of people who need sophisticated advice, and that’s why I think it’s critical that we have a good pipeline of people coming into the advice sector.”
However, for the “middle chunk” that only requires very simple guidance, the minister said there needs to be a “regulatory structure which allows for that”.
The NCA (New Class of Adviser) is lipstick on the pig previously known as the un-Qualified Adviser!
… a band-aid solution to a problem that is the government’s own causing – a single educational standard for all advisers because they failed to recognise (because they were deaf to adviser feedback) that the life insurance specialisation is actually quite different from other specialisations such as superannuation strategy, retirement planning or investment management.
That said, if the government would just be prepared to listen to advisers instead of pandering to vested interests such as life insurance companies and industry super funds, they would realise that the introducing NCAs (the cane toads of the financial advice world) will cause other unintended consequences, when a more elegant and natural solution can be very easily implemented under the existing framework: allow Financial Advisers to provide general advice for life insurance and Superannuation contributions where the client acknowledges that they have received general advice and not personal advice. This will entail providing the education (eg the difference between Any Occupation TPD vs Own Occupation TPD AND the Tax implications (15% to 20%) of an Any Occupation TPD claim before age 60 IF TPD insurance premiums are paid from Superannuation funds – a distinction I dare say many advisers don’t know off and certainly don’t explain well enough to their clients who choose to pay for TPD insurance premiums from their Superannuation fund) which they really could Google on their own if they tried hard enough and knew where to look and the adviser while providing general advice consolidates and condensed the relevant information to allow the clients to make an informed decision.
The benefit of the general advice model for advisers is that they do not need to produce a Statement Of Advice (SOA) thereby reducing their compliance burden and cost. However if the client still wants personal advice rather than make a decision for themselves (after having received the education as part of general advice) they can agree to pay $5000 for a Statement Of Advice (or whatever BullS*!t ‘lipstick on a pig’ name is given to the new SOA document that will still require as much work to produce to defend against an AFCA Complaint!)
… and to protect Financial Advisers against frivolous and vexatious AFCA Complaints, where the process is punishment in itself, the law is changed such that a client/consumer is not deemed to have received personal advice unless they have paid AT LEAST $1 for the SOA and personal advice!
SIMPLEZ!!!
Any Minister of Financial Services and association (FAAA I’m looking at you!) worth their salt might want to seriously consider allowing Financial Advisers (who have jumped over all the hurdles set by 1 Jan 2026) to provide general advice without an SOA and personal advice (if the client has paid AT LEAST $1 for the SOA and personal advice) for life insurances. This will bring more advisers back into the life insurance space, selling more life insurance and breathing life back into our broken insurance industry and reduce the under-insurance epidemic in Australia.
If they really had a spine, they would advocate an open up the dual advice model (ability to provide general advice and/or personal advice) to Superannuation which will negate the need to introduce the Cane Toad NCAs (New Class of Advisers).
Finally LIF (Life Insurance Framework) should be abandoned and acknowledged as the failed experiment it turned out to be with detrimental results for the public (who do not have the appropriate levels of cover and/or their insurance is structured wrongly so that it will cannibalize their Superannuation when they reach their late 50s and 60s.
The government should just stay out of pricing (mandating upfront commissions, trail commissions and clawbacks) as well as product (Bulls**t IDII contracts and no more Agreed Value Income Protection, thereby causing existing clients with Agreed Value IP policies to have their premiums increase become no new inflows can enter the pool as the pool ages) and just leave pricing and product innovation to the free market forces of supply and demand (between insurers, advisers and lives insured).
However the government should be able to influence policy.
Let insurers, set their own upfront commissions, trail commissions and clawbacks WITHOUT COLLUSION (in accordance to the Trade Practices Act) and the government policy can be that advisers have to provide a document that must be initialed by the client that shows the Commissions (upfront and trail) and clawbacks of all life insurance companies and the insurance company (and their commission payments) their adviser is recommending, thereby triggering a discussion both with the clients as well as the compliance team if it appears that the adviser is acting in their own interest rather than the client’s best interest.
Joseph, whilst not unimportant risk insurance is not the priority of the gov’t, it’s the accumulation to decummulation stage that is the priority. I largely agree with your comments except the variable commission structures. The old saying “you show me the incentive system and I’ll tell you what the outcome will be”. This too may lead to sub optimal outcomes. It will also lever the playing field of the big boyz with deep pockets against new entrants. This is not a good outcome at all. I therefore feel uniform commission structures are probably not a bad idea but the government shouldn’t stipulate the level. I’d suggest maybe an negotiation every 3-5 years between the Associations and the Industry or some other such methodology.
Other than that I agree with most of what you said. Except maybe shoot AFCA entirely and replace with a Professional Standards Board and take ASIC out of Advice. They can keep MIS’s and company registrations. Noting of course both of these are appallingly run but then that describes ASIC perfectly.
Nice words Daniel, we’ll wait until we see how you structure the reforms in legislation before we say thank you. My concern at this stage was that on several occasions you mentioned the “great work” and “big achievements” of Stephen Jones. Given how he really performed we’re starting on the wrong foot with these words. Hopefully the reliability of your words improve over time.