The Australian Labor Party is building a plan to reform advice according to Stephen Jones, the shadow minister for financial services and superannuation, but he needs the help of advisers to do it.
Fixing the advice gap is paramount, Jones tells Professional Planner, when so many families are under economic pressure due to the pandemic. It’s time policymakers listened to advisers, however, instead of guessing at solutions.
“Working Australians are going through a time of immense economic uncertainty,” Jones says. “Without good financial advice, people are going to fall prey to predatory financial behaviours and bad products that cost them money and leave them in poverty.
“I want to hear from your industry what we need to do to close that advice gap. What we need to do to create a productive, responsive industry. What we need to do to help.”
Not surprisingly, Jones, who is also the shadow assistant treasurer, takes a dim view of the Morrison government’s handling of the advice industry. Instead of solutions to the advice gap, he says, advisers have had eight years of “failed reforms and bad regulation”.
FASEA has been a “slow, painful debacle” Jones continues. “It was a body whose sole purpose was the production and promulgation of standards that couldn’t issue those standards until a few days before they come into effect”.
How the government’s replacement plan for FASEA will work, he says, remains a mystery. The ASIC levy has risen by 180 per cent in two years. Superannuation has never been more uncertain, and the same could be said for the life insurance industry.
“We see continued uncertainty about regulations, standards… and as a consequence of all this uncertainty we have seen 4,000 advisers exit the industry last year,” he says. “It is enough to make your head spin.”
Hill to climb
Jones is keen to reassure advisers that he values their role and sees it as an important part of a healthy financial services system.
At times, the ALP’s signalling on advice issues has rankled advisers. Jones has made it clear that his default position is a bias against “conflicted” life insurance advice commissions and he would need to be convinced against a ban.
Recent comments from ALP senator Jenny McAllister, who said “shonky” advisers would be the only beneficiaries of bill seeking to extend SMSFs from four to six allowable members, seemed to deepen concerns that the ALP takes a hardened view of the advice industry.
Not so, Jones says. In fact, there has never been a more important time for Australians to have access to good advisers.
“Labour has always been in favour of reforms that will support a professional, consumer-focused financial advice industry,” he adds.
The way forward
Jones believes there is a way forward for advice. He says the ALP has already started addressing some of the issues that are making life difficult, and expensive, for advisers.
“That is why I have written to the Treasurer to demand that he review the ASIC industry funding model,” he says. “That is why I have called for greater recognition of specialisations and experience in educational and exam standards in financial advice.”
While tackling these issues will help, Jones knows there are larger problems. Closing the advice gap is the key to a healthy advice sector, he says, so the real challenge is finding out what the industry needs to serve Australians better.
That’s why he’s inviting advisers to reach out to his office and let him know exactly what the industry needs from policymakers.
“We know that much of the consumer protection reforms have been necessary – we also know that it has had unintended consequences,” he says.
Jones identifies the compliance burden as a key element that can be improved to make the provision of advice more affordable.
“Everyone in this industry knows that good financial advice doesn’t come in the form of a hundred-page statement of advice,” he says. “There is a difference between red-tape and guard rails.”