Here's something for you to ponder: does an ambition to reinvent the financial advice profession predispose one to a role in Treasury, or does a Treasury role naturally engender those ambitions?
Put another way, do the clothes maketh the man? Does the egg precede the chicken? Perhaps it's too early in the day to reach a consensus on the kind of question that's vexed philosophers and brought empires to ruin, but it's worth contemplating whenever you have the time – especially if you consider advice policy a wedge issue in the fast-approaching federal election.
I'm asking this for two reasons: first, there's last month's announcement that the adviser education regime has well and truly been taken behind the shed. Per a statement from Stephen Jones, the complex professional pathways and approved qualifications of yore will be scrapped in favour of a simpler requirement to hold a "bachelor's degree or higher in any discipline."
Jones – who, on an unrelated note, voted for the FASEA legislation back in 2017 – presented this change as a necessary course-correction after the Coalition's professional standards policy left the advice industry "decimated" and "abandoned".
Class dismissed
So that's the first reason. The second is that, according to accounts of closed-doors conversations in Canberra last week, both the "new class of adviser" (NCA) and substantial changes to the best interests duty have been dropped from the long-awaited second tranche of the Delivering Better Financial Outcomes legislation.
That's a little surprising, isn’t it? I don't think I'm over-egging the custard by suggesting the NCA was the centrepiece of the whole DBFO reform package, given that it’s the government’s most direct response to the primary issue addressed in the Quality of Advice Review – namely, as Michelle Levy put it, there are “about 25 million Australians and there are too few financial advisers to provide financial advice to all who need it.”
Now, it’s possible that NCAs are still on the agenda; from what I’ve heard, the government might even include the proposal in the same reform package but consult on it separately. For that reason, it would be unwise to speculate too much about their omission from tranche 2.
No one’s ever confused me for a wise man, though.
The waiting game
Was it the name? The “NCA” placeholder has its merits – it rolls off the tongue, for one, and led to what some of my colleagues have described as “the worst headline of all time” – but it was never going to stick. This is partly because “newness” isn’t generally understood to be a persistent attribute, but there’s also the fact that calling NCAs “advisers” presents something of a reputational hazard for the profession.
As FAAA CEO Sarah Abood explained last year, there needs to be a “clear distinction” between the simple, limited advice NCAs provide and the services offered by a professional adviser. She added that “we don’t want our reputation to be harmed by advice given by NCAs that isn’t up to scratch.”
Let’s give the government the benefit of the doubt, however, and assume there’s at least one megamind in Treasury’s employ who’s come up with a few “NCA” alternatives over the past two years. What else could explain the tranche 2 carve-out?
Well, you could argue that it’s a matter of political expediency. Limiting affordable advice to super funds, which have been the primary focus of the DBFO reforms thus far, is a much easier sell than creating a new category of adviser that could be embedded in any financial institution, including banks and insurers.
I have a simpler explanation, though: perhaps Treasury, like countless Treasuries before them, have discovered that advice reform is a lot more complicated than it might initially appear. This is especially the case with the DBFO reforms, which are based on a series of recommendations by Michelle Levy – recommendations that were never intended to be meted out on a piecemeal basis.
As demonstrated by the FASEA about-face mentioned above, even the best-laid plans of mice and men often go awry.
When former Assistant Treasurer Kelly O’Dwyer announced that the new professional standards body would "improve public confidence in the [advice] sector" upon its 2019 launch, could she have known, as Stephen Jones now does, that it would leave the industry “decimated and abandoned”?
Little wonder, then, that this is where we've arrived. Whatever – streamline fee consent, simplify the SOA and prepare the horses for the campaign trail.
Advisely Team