Why 2014 makes 2024 look like a walk in the park

A decade ago, the phrase on every financial adviser’s lips was “FOFA”. In 2014, two years after the government introduced the first of the Future of Financial Advice reforms, based on the recommendations of the so-called Ripoll Review, the advice industry was taking its first tentative steps towards professionalism.

It’s a path on which the industry has frequently wavered, but which has brought it to a broadly better place than whence it came.

But it’s worth remembering that there were powerful, mostly institutional forces against the new rules that would, among other things, ban commissions on investment and superannuation products as part of a bigger move to eliminate conflicts of interest.

That trek to professionalism continues. But if you think the process around the Quality of Advice Review (reborn as Delivering Better Financial Outcomes) changes is a mess, think back 10 years to the chaos surrounding the FOFA reforms.

The Ripoll Review or, to give it its full title, the Parliamentary Joint Committee on Corporations and Financial Services Inquiry into Financial Products and Services in Australia, was delivered in November 2009.

By June 2012 the government had introduced the Corporations Amendment (Future of Financial Advice) Act 2012 and the Corporations Amendment (Further Future of Financial Advice Measures) Act. These amendments ushered in the Best Interests Duty, banned some forms of conflicted remuneration, and introduced the obligation to have clients opt-in to ongoing fee arrangements.

Compliance with the new laws was due to begin in mid-2013. ASIC took a “facilitative approach” to compliance (i.e. a lot of tut-tutting but no enforcement) for 12 months, but by mid-2014 the FOFA changes were really beginning to bite.

Then things started to go haywire.

In March 2014 the government introduced the Corporations Amendment (Streamlining of Future Financial Advice) regulations.

This meant that in the space of less than two years we’d gone from the Future of Financial Advice laws and the Further Future of Financial Advice laws to the Streamlining of Future Financial Advice regulations.

In other words, the government had two goes at amending legislation, and then launched a simplification process to help clean up some of the mess that had been created. It was already difficult to keep up.

But more was to come.

The Streamlining Future Financial Advice regulations were disallowed by the Senate in November 2014, so we reverted to the pre-regulation environment. Then in December the government introduced the Corporations Amendment (Revising Future of Financial Advice) regulations, which reinstated the regulations disallowed the month before.

Meanwhile, planned changes to Statements of Advice, introduced in September 2014 via the Corporations Amendment (Statements of Advice) Regulation, and which were meant to start on 1 January 2015, were repealed in December 2014 by the Corporations (Statements of Advice) Repeal regulations.

Keeping up? If it’s difficult to follow now, just remember what it was like to live through this period – or thank your lucky stars that you didn’t have to. It genuinely makes the DBFO process look considered and efficient.

It’s appropriate that a decade later the regulations and legislation governing financial advice should be revisited, and it’s unsurprising that reviewing a complex system with layer upon layer of regulation has created its own uncertainty and chaos.

But looking back at it now and recalling the chaos and uncertainty of the times, it’s possible to see how some order emerged. It’s indisputable that financial advice is closer to being a real profession now than it has ever been.

Numbers are down, yes; but the calibre of those who remain is demonstrably higher. Every adviser practising today has passed an exam; all advisers practicing after the end of 2026 will have attained a degree or equivalent, or higher, qualification. A code of ethics is in place.

In 2014 the advice industry was dominated by institutions – the big four banks, AMP and IOOF (now Insignia Financial) – who accounted for a significant majority of authorised representatives. Today only two institutions remain and neither of them are banks; and a new institutional force in advice looms on the horizon, namely super funds.

It’s been a tumultuous and turbulent decade. There has been pain and dislocation in the ranks of advisers; some dead wood has been cut out, but some good advisers and practices have fallen by thew wayside as well.

But it has also been a defining decade – one where advice as a service took centre stage, and the product-related conflicts that had blighted the industry for decades were largely excised; one where the educational and professional standards of advisers were significantly cranked up; and one for which, irrespective of the current uncertainty surrounding further reforms, the future looks much brighter than 10 years ago.