Shared from the 6/4/2022 Financial Review eEdition

Labor to fix financial advice ‘hot mess’

Wealth planning

Financial Services Minister Stephen Jones says he will prioritise easing the regulatory burden on financial advisers within three months to stop the exodus of professionals and make advice more affordable for consumers.

In his first interview since he was sworn in as a minister in the Albanese Labor government, Mr Jones said the complex rules governing financial advice and controversial adviser education standards introduced by the previous government needed urgent fixing.

‘‘The regulatory burden has gone crazy and there has been a complete mishandling of the professional qualifications,’’ Mr Jones told AFR Weekend.

‘‘Let’s fix the hot mess now, so we don’t have more people exiting the industry and so people aren’t jumping through crazy hoops. The objective is to make sure we have high quality, affordable financial advice for the thousands of Australians who are retiring with more superannuation than they’ve ever had in their lives.’’

The comments indicate that Labor will pursue deregulation of the troubled advice sector without waiting for the recommendations of the Quality of Advice review being headed by Allens lawyer Michelle Levy, which is due to report back to the government by the end of the year.

That review was a recommendation of the Hayne royal commission, but its terms were expanded by the Morrison government to include a focus on consumer access to advice – a widely acknowledged social problem, including by last year’s Retirement Income Review.

Just 10 per cent of the Australian population receive financial advice, down from about 14 per before the royal commission. The number of practising advisers has plummeted and is expected to be half the size next year compared with 2018. The diminishing supply has helped push up the median price of advice by about 40 per cent to more than $3500 a year.

Mr Jones, who will also serve as assistant treasurer to Jim Chalmers, said he would quickly move to overhaul the implementation of the hundreds of pages of regulations for the ‘‘best interests duty’’ and product disclosure documents ‘‘which nobody reads’’ and were driving up the cost of advice.

In December, Mr Jones had announced that a Labor government would exempt advisers with a clean regulatory record and at least 10 years’ experience from needing to obtain a degree in an attempt to stem the premature retirements.

But his post-election comments to AFR Weekend suggest the Albanese government would even be willing to consider tweaking parts of Labor’s landmark Future of Financial Advice reforms. They include the prescriptive way in which advisers must prove they have acted in clients’ best interests, known as the ‘‘safe harbour’’ provisions, and the need to provide a statement of advice (SOA) legal document.

The comments will be warmly welcomed by the financial services industry, which has in recent days called for the new government to urgently act on stripping out red tape and not wait for the findings of the Levy review.

A short documentary film released on Friday showcased industry leaders pleading with the new government to fix ‘‘wealth’s greatest challenge’’ of advice affordability. The film, an initiative of ASX-listed technology firm Hub24 and industry social media platform XY Adviser, made the case for the regulatory burden to be eased.

Mr Jones told the Association of Independently Owned Financial Professionals (AIOFP) conference last year that he was initially sceptical of industry calls for deregulation, but had been convinced after visiting the offices of advisers and witnessing their paperwork burden first-hand.

The AIOFP, which represents small and independent advice licensees, strongly endorsed Labor in the federal election and also helped efforts to unseat influential Coalition figures such as former treasurer Josh Frydenberg in Kooyong. Though many of its members were lifelong Liberal voters, the lobby group turned on the former government over its insistence that older advisers be re-educated.

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