Prime Minister Anthony Albanese’s ministerial reshuffle at the end of last month might have been something of a double-edged sword for Stephen Jones.
On one hand, Jones retained his positions as Assistant Treasurer and as Minister for Financial Services; recognition of a job well done in complex, difficult portfolios. On the other hand, Jones will for the foreseeable future remain in the firing line of sections of the financial advice community underwhelmed by the progress he’s made legislating the recommendations of Michelle Levy’s Quality of Advice Review.
Jones’s shadow, Luke Howarth, reminded us last week that it had been almost 600 days since Levy delivered her final report to the government and so far only one tranche of legislation has passed parliament – and even that was not a smooth process, riddled with drafting glitches and unintended consequences that took time, attention and energy to go back and fix.
Tranche one was meant to be the simple reforms.
It’s difficult to overstate how important it is that the government gets this second tranche of reforms right. The advice gap – the difference between the demand for financial advice and the supply of advisory services – is widening daily.
The number of people reaching the stage in life when they need information, guidance and advice on how to transition into retirement is growing faster than the advice profession can add new capacity, either in the form of better productivity per existing adviser, or by the entry of new advisers to the profession.
About 520 people will retire every working day of the week in 2024, according to the Australian Bureau of Statistics. If it’s true that each adviser serves around 100 clients, then the profession needs to grow capacity by the equivalent of around five fully fledged and, most importantly, fully productive advisers every single working day of the year.
Whether the true number of advisers remaining is 15,000 or 16,000 or some other figure, the simple fact is that there are not enough of them to serve the volume of people who need advice and guidance.
Any government has a limited capacity to enact legislation between elections – three years, at best – and can ill-afford its legislative program to be clogged up with avoidable errors and own goals.
Reforming financial advice could be a lasting Jones legacy, but only if it’s handled the right way over the next six months. He needs to reflect the confidence put in him by the Prime Minister by delivering tranche two as smoothly and with as few of the avoidable errors that characterised tranche one as possible.
Jones has rightly stressed the need to stay focused on the big picture, that the reach of the QAR (now called Delivering Better Financial Outcomes) is both deep and wide. The most substantive areas of advice reform are in tranche two.
Consultation is due to start imminently, with a legislative timetable looking like converging on the end of the year for reforms that seek to expand the availability of advice, including the creation of the confusingly named “qualified adviser” (which is likely to be renamed).
It’s expected that super funds will be at the head of the queue to capitalise on this opportunity, as they face a wave of members close to or entering retirement who will need information, guidance and advice as they make the transition.
But insurers, banks and even existing advice practices and licensees will also be free to employ qualified advisers if they want to, and if they can find a way of making it economically viable to employ an individual who’ll be prevented by law from being paid a fee by the client and from receiving a commission.
It’s critical that the creation of qualified advisers – or whatever they are ultimately called – is as smooth and cost-effective as it can possibly be, because it is an important step towards rectifying possibly the single biggest restriction on the availability of advice to Australians.
Qualified advisers alone won’t solve the advice shortfall. Other channels, notably digital, need to be developed in parallel and the productivity of existing advisers needs to increase.
There may have initially been little enthusiasm in Labor ranks for picking up the recommendations of a review instigated by a Coalition government. But the only other option was to shelve the QAR, open another review, create another delay, and then face the prospect of its recommendations landing in the hands of a new government equally uninterested in implementing the outcome of a predecessor’s review.
But it’s worth remembering that the QAR review was kicked off following the Hayne royal commission, instigated in large part in response to poor practices – including what amounted in some cases simply to theft and fraud – that had crept into the system since Labor’s own Future of Financial Advice reforms of a decade ago. An overhaul of the laws governing financial advice was overdue.
“There’s just an enormous amount of work and complexity to this,” Jones told the Professional Planner Shape of Advice podcast.
“You think you’re dealing with something which is isolated over here, like a really simple thing, like removing the safe harbour provisions, and you think that’s an issue that might only affect professional advisers. But it has tentacles all throughout the rest of the legislation and the regulatory landscape. Tinker with something over here, it has an impact on something over there. It’s a huge job of work.”
That may be so, but having committed to running with the QAR recommendations, Jones has a duty to deliver the reforms as quickly but as carefully as possible.
This article is well off the mark on a number of fronts.
First, most Ministers retained their existing portfolios except those who are retiring and Andrew Giles and Clare O’Neil who have both brought disgrace upon the ALP for their mishandling of the release of foreign convicted rapists, murderers and paedophiles into the community. There can be no claim that Jones stayed as “recognition of a job well done”.
Second, the mythical “advice gap” ignores the fact that nearly all financial advisers would take more clients. Simply ask a room of advisers who would like another client, and most will stick up their hand; hence there is no shortage of advisers. The issue is the cost of advice. And that stems from the red-tape and industry taxes that the government, and their bureaucracies impose. It is relentless. 15,000 advisers is more than enough, they just need to be able to work without the shackles of unproductive government imposition.
Lastly, there will be no positive legacy of Jones. He has done nothing of note and seems oblivious of anything other than an attempt to help product providers re-enter the market. His term, “qualified advisers” illustrates this. He wants product providers to give the appearance of providing financial advice without the red-tape of actual qualified advisers. To have Professional Planner espouse the importance of this is bewildering, especially as the author used to bemoan the state of the industry pre Hayne.
The standard reply from ALL Lawyers to massive delays and Legislation that only Lawyers can understand, though is ALWAYS left open to legal interpretation, is that “Legislation is very complex.”
What Stephen and all his ilk fail to mention, is that it is a deliberate strategy, so the common people will hold the Legal fraternity on a pedestal of ubiquitous esteem and awe and if that fails, then fear and retribution for all those who dare question the legalize structure, designed to hold back a Country’s ability to move forward, without the constant roadblocks our Legal eagles make their fortunes from at ALL our expense, in cahoots with the Legal System run by the very same people who are part of this totally vested interest group, or should I say, club.
Justinian was the only leader who saw what these highly educated and overpaid cowboys were and still are, which is nothing more than an elitist club who want to control the game and charge everyone, outrageous fees to be provided with a service that only satisfies their own Legal fraternities mindless obsession of their own superiority.
This may sound harsh, though let us look at what has been achieved by this self serving band of Institutionalised robots who are too stuck in their ways to even recognise the absurdity of how they conduct themselves and how their game of thrones ploys completely stymies EVERYONE else who is trying to move forward in a cohesive manner to better all our futures.
Stephen may talk about change for the better, though being a Lawyer, he is incapable of doing it in a manner that is clear, concise and actually works.
Putting Lawyers in charge of anything that impacts society and Business, is like putting a fax in charge of the hen house.
Simon, you are a man of integrity and I know you and many others who are trying to get the Politicians to do the right thing, though we always have been and always will be, hamstrung by politics and Lawyers who are always on a different page and different agenda to the rest of the world.