The first Delivering Better Financial Outcomes bill has passed the Senate after the government bowed to industry pressure and amended controversial changes to s99FA of the Superannuation Industry (Supervision) Act.
The bill passed Senate around midday on Thursday, with the amended bill passing the House of Representatives later in the afternoon.
Minister for Financial Services Stephen Jones said the second tranche of reforms will be developed over the second half of the year.
“This includes the government’s commitment to reform statements of advice, modernise the best interests duty and remove the safe harbour steps, and increase the provision of advice by financial institutions,” he said in a media release.
The controversial changes to s99FA sought to codify existing guidance used by the regulators. The advice sector raised concerns the wording of the draft bill could lead to trustees being required to check every Statement of Advice issued to members, an obligation funds lack the resources to do.
While ASIC and Jones have publicly stated this would not be the case, the amendments have quelled anxiety in the sector, which has welcomed the change.
WT Financial Group managing director Keith Cullen, representing the Joint Licensees Group, said in a statement it was a “huge victory for common sense”.
“This is the first time I have seen individual advisers organise and start to participate directly in the political process to have their voices heard, which I am sure has had a very positive impact,” Cullen said.
“Most significantly, congratulations to the minister for having the pragmatism and courage to make the amendments, despite what the senate committee report concluded.”
Financial Advice Association chief executive Sarah Abood said the changes are a positive step and said she is pleased the minster acted.
“It confirms that there is no intent to change the existing practice of superannuation funds when checking that financial advice fees are being paid in accordance with the sole purpose test,” Abood said.
“This should reassure superannuation funds that their existing risk-based approach can continue, minimising additional documentation requests to advisers.”
The changes have also been well received by the superannuation industry, with Super Members Council CEO Misha Schubert welcoming the passage of the bill.
“We will closely follow the implementation of the revised 99FA along with general obligations in the SIS Act to ensure members can obtain the advice they need efficiently and at a reasonable cost,” Schubert said.
“We look forward to working with the sector, the government and the parliament on securing these vital reforms that will give millions more Australians access to low-cost high-quality financial advice.”
But while industry representatives took a pragmatic approach to Jones’ changes, Coalition Senator Andrew Bragg said the handling of the bill had been “bungled” by the government.
Jones had previously said the government had “got it right” on s99FA, and the Senate Economics Legislation Committee recommended passing the bill in its previous form.
“I am staggered by the scale of the amendments that have been required to have been delivered to not just this bill but all these bills,” Bragg said during debate on the bill in the Senate on Thursday afternoon.
“This position was defended by the government…and now the government has capitulated and made the amendments we had flagged.”
Bragg criticised the government for it’s slow passage of reforms and using a “cherry picked” version of the Quality of Advice Review report.
“I give credit to government for agreeing to amend the legislation in the way we had suggest we do, but I put on record this is a very small reform in the financial advice space,” Bragg said.
The government’s QAR response had been split into three streams. Tranche one was meant to be the “quick wins”, but instead has been mired in controversy.
The first of the DBFO bills was fraught with errors: the first draft failed to mandate a standardised fee consent form, which was later rectified; while the wording of the bill tabled in Parliament in March would have effectively banned commissions for general advice providers.
But Insignia Financial CEO Scott Hartley, who was an outspoken critic of the provision in the bill, said he is pleased the government listened to industry concerns and recognised the importance of providing clarity and achieving the right outcomes.
“Trustees can now continue to use existing risk-based practices with confidence to meet the needs of their members,” Hartley said.
AMP group executive for advice Matt Lawler said the amendments better reflect the objectives of the QAR.
“The government should be commended for working with industry to effect change that will provide greater clarity for both superannuation trustees and financial advisers, and which will contribute to more affordable financial advice,” Lawler said.
FSC chief executive Blake Briggs said the amendments and supporting explanatory memorandum make it clear that trustees’ current risk-based approaches to assessing advice fee deductions remain appropriate.
“[Minister Jones] has continued to consult with industry and the FSC recognises the collaborative approach he has taken to work towards the common goal of making financial advice more affordable and accessible for consumers,” Briggs said.
“The FSC supports the amended bill passing the Parliament, which will serve as an initial down payment before the next tranche of reforms that will expand access to lower cost financial advice for millions of Australians.”
This is an indictment on the various associations (FAAA in particular) that “This is the first time I have seen individual advisers organise and start to participate directly in the political process to have their voices heard, which I am sure has had a very positive impact,” Cullen said.”
This is why we pay our damn association fees, so we DO NOT HAVE TO deal with government individually while the FAAA navel gazes and pushes paper in their ivory tower!
Stephen Jones has managed to pull the wool over everyone’s eyes as he and Labor have protected the interest of their mates in the industry super funds; “Qualified Advisers” my foot!!! When they literally are unqualified advisers!!!
… meanwhile advisers levies are going up but nothing is being done to stop frivolous and vexatious AFCA complaints.
I have advocated at AFCA AGMs to require:
1. a $1,000 refundable bond (that can be waived if financial hardship can be demonstrated) be required to lodge an AFCA complaint
2. at least $1 be paid for personal advice otherwise it cannot be considered personal advice and an AFCA complaint about personal advice is not applicable.
THAT is how to reduce costs incurred by AFCA payouts against Financial Advisers and that’s how the Levy can be reduced.