Why NCA?

When captured by the cyclops, Polyphemus, Odysseus is careful not to reveal his name.

Names are powerful things, after all – refer to the case of Miller’s Daughter v Rumpelstiltskin [1812] to get the full CPD hour – and our hero knows better than to hand that kind of leverage over to Poseidon’s one-eyed son. So, he gives his captor a different ὄνομα: he is, he explains, simply a “new class of adviser.”

That’s how I remember it, anyway. And you know what? I can’t help but feel that the absurd premise I just invented has some bearing on the present moment in Australian financial advice. 

There's no need to feel down

Stephen Jones surely agrees. The Assistant Treasurer should be familiar with the potency of the ὄνομα by now, having debuted the “qualified adviser” label to widespread bewilderment back in 2023. He and Treasury have been more demure since then, exclusively using the placeholder term “new class of adviser” (or “NCA”) while conducting closed-doors consultations on the second tranche of the DBFO reform package.

You can kind of understand why: no matter what the NCA ends up being called, it’s ultimately based on a definition by negation. Unlike their OCA (?) counterparts, NCAs will supposedly only be able to advise on “simple” matters. They might also be restricted to certain client cohorts and will almost certainly have fewer professional obligations (and qualifications). 

Of course, even these crudely-drawn boundaries warrant a prod or two. 

For example, how do we define simplicity in this context? Will the threshold between low-cost, “simple” advice and traditional fee-for-service advice be encoded in the DBFO legislation? Will ASIC handle it via regulatory guidance? Or will it be up to the consumer to determine the relative complexity of their financial circumstances when shopping around for an adviser?

As FAAA CEO Sarah Abood put it in her keynote address to the FAAA Congress on Tuesday, “the scope of the NCA will be simple – but what do we mean by ‘simple’? [It should be based on] a clear division between what these people can do and the service delivered by a professional financial adviser.”

Abood offered multiple suggestions, derived from FAAA member feedback, as to how this could be achieved. These included limiting NCA services to products clients already hold, defining simplicity in relation to the client’s circumstances and creating a “safety list” of products and strategies that are “harder to get wrong.”

“What’s non-negotiable,” she said, “is that we need a clear distinction. We don’t want our reputation to be harmed by advice given by NCAs that isn’t up to scratch.”

As to why NCAs might pose a reputational hazard to the profession, Abood argued that even the simplest advice requires expertise: “We all know that simple advice isn’t that simple. It’s vital that people advising consumers have the education to do that well. RG 146 is not going to cut it.” 

Get yourself off the ground

Indeed, I’d say this has always been one of least coherent components of the (admittedly nebulous) NCA proposal. 

If NCAs are essential to “[addressing] the large and growing gap in the availability of retirement advice,” as Stephen Jones argued back in June 2023 – adding at the time that Treasury aimed to “finalise implementation details” in the “coming weeks” – one wonders why an entirely new and explicitly less-credentialed class of adviser is better-suited to this task than, say, one who had to go back to university in 2017 after practicing for 30 years. 

According to Abood, though, the biggest concern among FAAA members is much more straightforward: it’s the name, or lack thereof. 

“When the rather ill-advised term ‘qualified adviser’ emerged,” she said, “ it caused a lot of concern in the industry. Not long after that, it quickly disappeared and the Minister has assured us this will not be the final name. 

“We know you’re strongly opposed to ‘planner’ and ‘adviser’ appearing in the title. These are controlled terms in the legislation and have been hard-earned. We want to protect them.” 

That’s the issue, though, isn’t it? As Polyphemus learned, It’s very difficult to protect against a threat you can’t see or tackle a problem you can’t even name. And with Stephen Jones cancelling his scheduled Q&A session at Congress this week, the “NCA question” remains frustratingly unanswered. 

Of course, even Odysseus eventually gave up his name – and the sea took notice.