The Financial Advice Association Australia has outlined the impending ‘to-do list’ for the next financial services minister, calling attention to the heavy body of reforms required to fix multiple issues in the industry.
Regardless of the outcome, the next federal election will see a successor to Minister for Financial Services Stephen Jones, who announced he was retiring from politics after 15 years.
At the FAAA Roadshow in Melbourne last Thursday, general manager for policy Phil Anderson listed off the issues the new minister is going to have to tackle, including the Compensation of Last Resort, fee consent form standardisation and the education pathway as it is unlikely anything will be solved prior to the election.
“They have to fix [the] CSLR – $193 million over the next two years is simply inequitable and unsustainable. It has to be fixed and it needs to be fixed as soon as possible,” Anderson said.
“They need to resolve the mess we have with fee consent. They need to deliver the flexibility with respect to the education standard so we can get more new entrants into this critically important profession.”
The CSLR had revealed at the end of January that estimates for the FY26 levy due later this year will total $70 million for the advice subsector, well over the $20 million subsector cap.
CSLR chief executive David Berry told the Professional Planner Advice Policy Summit just days later that the scheme projected the FY27 levy will surpass $123 million.
The association has been critical about the government’s reforms to fee consent which was meant to introduce a standardised form via ministerial power, which Jones has yet to mandate.
The expansion of the education pathway, which the minister had announced at Advice Policy Summit, is unlikely to see any official declarations made until after the election.
Anderson said there is a bigger picture for the new minister to focus on when the initial problems are solved.
“We all need overall policy settings, a regulatory regime that promotes financial advice reduces the cost of providing financial advice and makes it so much easier for you to provide that great service that you provide to your clients that has such a big impact on them and their families,” Anderson said.
Additionally, the next minister is likely to be tasked with implementing the rest of the Delivering Better Financial Outcomes reforms.
First resort
Anderson criticised the government for its failure to pay for the first 12 months of the CSLR and instead only paying for the first three, as well as Jones’ lack of a decision regarding what the government will do about the excess of the $20 million sector cap.
“The time has come for them to pay their fair share,” Anderson said. “We want them to give a certainty about the handling of any amount in excess of that sector cap.”
Anderson said the CSLR was remediating product failures and questioned why the advice profession must pay up for complaints about products.
He noted how the failures of Dixon Advisory were because of the US Residential Masters Fund, while the failures of United Global Capital were also due to its fund, the Global Capital Property Fund.
“These are product failures to a larger step, not advice,” Anderson said. “Why is advice forced to pay for everything?”
Only last week, the association called for major changes to the scheme, including halving the subsector cap from $20 million to $10 million and changing insolvency laws.
The association has also advocated for changes to the Australian Financial Complaints Authority notorious ‘but for’ methodology, which the government has hinted is likely to be reformed, at least with its implication towards the CSLR.
The methodology allows for clients to receive compensation from the CSLR despite experiencing no capital loss if they would have been better off financially without the bad advice.
Berry revealed around 80 per cent of claims that go to the CSLR are based on this provision.
Fee consent form failure
The association expressed disappointment about how Treasury handled the fee consent forms issue and there is still no consensus despite legislation having passed the middle of last year.
The industry was working with Treasury to co-design a standardised fee consent form to ensure everyone uses the same form and processes.
Anderson said Treasury were “critical” in delivering the outcome but “the outcome with fee consent is very different than what we had hoped for”.
Although product manufacturers were required to have their solutions submitted by the 10 January 2025 deadline, Anderson said the problem is they built forms that don’t necessarily meet the requirements advisers have to comply with.
“In the end, we’ve got a range of forms out there, but more than likely what we expect at this stage is financial advisers have to do their own forms and then get their clients to also complete the product provider forms,” Anderson said.
Another brick in the wall
While the association had shown discontent over the minister’s handling of reforms, it was still a big proponent of boosting the number of financial advisers through the newly-proposed expansion of the education pathway.
Currently, an aspiring financial adviser must complete a specialised financial planning degree, which the association believes is not flexible and attractive.
Anderson said the proposal to accept a broader range of degrees for new entrants is a positive, noting they still have other requirements to fulfill.
“What is important, though, for these new entrants, they will still be required to comply with the existing requirements around the exam a professional year and ongoing CPD,” Anderson said.
As it is unlikely the proposed changes to the education pathway will be acted on before an election happens, they will land in the new minister’s lap.
