The claim by Minister for Financial Services Stephen Jones to have achieved broad consensus for Tranche 2 of the Delivering Better Financial Outcomes legislation has been seriously questioned within 24 hours of the announcement.
While Jones announced on Tuesday evening a middle ground had been achieved by offering licensees the ability to hire the controversial new class of advisers (NCAs), there is still discontent over the charging mechanism and education level that will be required.
WT Financial Group managing director Keith Cullen said the advice profession is “potentially” a winner of the latest announcement, but the losers are consumers and retail funds.
“The big industry funds will simply use their size and might to clip a few basis points out of everyone’s account,” Cullen told Professional Planner.
“They’ll fund an army of backpackers with a DFP [Diploma of Financial Planning] and they will market the hell out of themselves. It’s just a massive vertically integrated client and fund retention strategy. If retail funds or consumers though this was a win… the dragon might have given the hostage back, but he’s chopped off their hands and their feet. It’s not a great outcome.”
Super Consumers Australia said the proposal lacks detail and risks exposing people’s retirement savings to advice from a “poorly trained, highly conflicted” new class of advisers.
The consumer advocacy body the laws would encourage super funds to charge fees for no services and “flies in the face” of the Hayne royal commission which called the reforms a win for super funds who will find it easier to “charge their members for conflicted advice”.
“The proposal will see super funds recoup the cost of these poorly trained advisers from all super fund members, regardless of whether they use the service,” the SCA media release said.
“There are no proposed limits on what super funds could charge members for this service. The super industry is already spending $73 million in members’ money every year on these services, and the reforms are likely to see this figure increase significantly.”
But while SCA was critical over the ability for funds to collectively charge for advice, industry fund lobby group Super Members Council expressed concern over the provision that will allow the charging of fees despite otherwise welcoming the government’s announcement.
“We note the announcement on a new class of adviser and their ability to charge one-off fees,” SMC chief executive Misha Schubert said. “This charging ability must be accompanied by robust consumer protections.”
Standards of education
The Financial Advice Association said it was “cautiously positive”, welcoming that advice businesses can employ NCAs and charge a fee – which it had campaigned for – but reiterating they didn’t want them to be called advisers.
“It’s extremely important that the education for NCAs can count towards a full financial planning degree, and that the NCAs of today can become the professional financial advisers of the future,” FAAA chief executive Sarah Abood said.
Kaplan Professional CEO Brian Knight echoed Abood’s sentiment and said he hoped the government would push for a higher education diploma instead of a vocational diploma.
Vocational education diplomas are regulated by the Australian Skills Quality Authority to provide structured training to registered training organisations like TAFEs and private training providers, whereas higher education diplomas are offered by universities regulated by the Tertiary Education Quality and Standards Agency.
“We’re trying to get clarification from the minister, we think it means a higher ed diploma which is eight subjects, first year of a degree,” Knight said.
“That way you’d have the pathway for full advice which makes sense because then they could go straight in and finish the degree. Kaplan does both, so we’re happy either way, but it makes sense to be higher ed.”
A spokesperson for Jones confirmed the new diploma requirement will need to be from a higher education provider regulated by TEQSA.
“The education requirements are an important part of ensuring that the advice received by Australians is safe and high quality,” the spokesperson said.
“The standard will be commensurate with the scope and complexity of the advice provided. We also want to make sure that the education requirements are aligned with the broader education pathway for financial advisers to help rebuild the profession.”
While the Council of Australian Life Insurers – along with members TAL and MLC Life Insurance – sent out statements supporting the announcement, CALI’s proposed lower education standard was ultimately rebuffed by the minister.
Greater pathways
The DBFO reforms, created off the back of the Quality of Advice Review, are meant to help improve affordability and expand accessibility of financial advice, but Cullen said expanding the pathways for new entrants to include a broader range of degrees would have made greater progress on this goal.
“If you really cared about fixing access to quality advice that is the first thing you would fix,” Cullen said.
Cullen said there also a “perfectly good” general advice framework which isn’t used which he argued was due to the High Court decision in 2021 between Westpac/ASIC over its then subsidiary, BT Funds Management.
The verdict from the court was that BT provided unlicensed personal financial product advice while the regulator argued the bank was actively conducting a sales campaign aimed at rolling customers into vertically owned products under the banner of general advice.
“We just need to negate that Westpac/ASIC decision by enabling the law to people to give general advice and information that is tailored to people’s current position,” Cullen said.
“That Westpac decision knocked so many people out of the market because it said if you know too much about someone it can’t be considered general* advice.”
Given the limited scope of APRA-regulated products that NCAs could advise on, the SMSF Association lamented the lack of regulatory coverage in the bill for self-managed super funds.
“It remains a mystery to us why the role other professional advisers, such as accountants, could play was still being overlooked,” SMSF Association CEO Peter Burgess said.
*This article was updated on 5 December to correct a quote.
It is a pity the FAAA are “cautiously positive” on these proposals. They seem to always represent the government rather than actual financial planners.
The DBFO reforms, as outlined in Tranche 2, represent a thinly veiled resurrection of “fee for no service” practices, with collective charging emerging as nothing more than trail commission under another name. Super Consumers Australia (SCA) has astutely identified the core issue: these reforms prioritize industry super funds’ interests at the expense of transparency, fairness, and consumer choice.
Collective Charging: Fee for No Service 2.0
SCA’s criticism of collective charging is crucial. By allowing super funds to recoup the cost of NCAs from all members—regardless of whether they use the service—the government is institutionalizing a practice that was condemned during the Hayne Royal Commission. This is a textbook case of “fee for no service,” rebranded to appear consumer-friendly while shifting costs onto members who derive no benefit. It defies logic to claim these measures align with consumer protection when they essentially replicate the very practices that eroded trust in the financial services industry.
Moreover, the lack of caps or transparency around these charges means the $73 million already spent annually on advice services by super funds will likely balloon. Without robust safeguards, members could see their retirement savings drained to fund poorly trained NCAs offering scoped advice with inherent conflicts of interest.
Trail Commission by Another Name
The collective charging model functions as trail commission disguised as a “member service fee.” Super funds will clip a percentage of members’ balances to fund their in-house advice operations, ensuring a steady revenue stream without the accountability that comes with direct fees. This setup heavily advantages industry super funds, which can subsidize advice costs and use NCAs as a retention strategy to steer members into group insurance and in-house products.
The implications for competition are dire. Retail funds and independent advisers, constrained by stricter regulations and lacking the ability to spread costs across all members, cannot compete with this model. This is not “neutrality across advice models,” as the government claims—it’s a blatant tilt in favor of vertically integrated industry super funds.
SCA’s Position: A Warning Worth Amplifying
SCA’s warnings about the risks of conflicted and low-quality advice from NCAs are well-founded. These advisers will be limited to providing advice on APRA-regulated products, further reinforcing the dominance of group insurance and other super fund-controlled offerings. The scope of advice is narrowly defined to benefit the employer—industry super funds—rather than the member. This undermines the very principle of impartial, high-quality financial advice.
Additionally, SCA’s concern that NCAs are “poorly trained” is supported by the ongoing debates over education standards. While the government has rebuffed calls for lower standards, the minimum requirements for NCAs still fall short of those for professional financial advisers. This double standard risks creating a two-tier advice system, with NCAs providing subpar, product-focused advice while professional advisers struggle to compete.
CALI and Other Stakeholders: Clueless or Complicit?
The Council of Australian Life Insurers (CALI) and its members, such as TAL and MLC Life Insurance, have inexplicably welcomed these reforms. By endorsing a model that will primarily benefit industry super funds, CALI appears either oblivious to or dismissive of the harm these changes will cause to their stakeholders. NCAs employed by industry super funds will inevitably push group insurance products, further eroding the market for retail insurance—a segment already under significant strain.
This raises a critical question: does CALI truly misunderstand the implications, or are they prioritizing short-term alignment with government policy over their stakeholders’ long-term viability? Either way, their support underscores a failure to critically evaluate how these reforms will reshape the competitive landscape.
The FAAA’s Persistent Complacency
The FAAA’s “cautiously positive” stance reflects a continued failure to grasp the larger dynamics at play. Their focus on education pathways and the potential for NCAs to address the advice gap misses the point: this isn’t about creating a pipeline of future advisers but about cementing industry super funds’ dominance. By endorsing the collective charging model and failing to challenge its structural implications, the FAAA is effectively enabling the erosion of independent advice.
The Broader Impact: A Monopolistic Power Grab
At its core, the DBFO reforms are a power play by industry super funds, using NCAs to create a vertically integrated advice and product ecosystem. This model locks in members, stifles competition, and leaves consumers footing the bill for conflicted advice they may never use. It is a direct assault on the principles of transparency, competition, and consumer-first financial advice.
The government’s claim of “broad consensus” is already unraveling as key stakeholders—like SCA and others—highlight the reforms’ flaws. Far from leveling the playing field, these changes reinforce existing inequalities and set a dangerous precedent for the future of financial advice in Australia. Without significant pushback from the profession and consumer advocates, these reforms risk institutionalizing practices that benefit the few at the expense of the many.
Blind Freddy can see this will eventually end badly – we’re been here before! Why would we revert to the historical failed position of permitting diploma qualified inexperienced people masqurade as professional financial advisers via a product provider? Why not instead focus on eliminating costly and ineffective red-tape and enable degree qualified financial professionals to help more people at much lower cost? What has the Government learnt since 2028? Clearly nothing.