In a statement on Tuesday night, Financial Services Minister Stephen Jones unveiled further details of the government’s second tranche of the Delivering Better Financial Outcomes (DBFO) package, emphasising its aim to meet Australians’ needs by expanding access to high-quality, safe, and affordable financial advice.
Under the new guidelines, businesses such as super funds, insurers, and banks can charge a direct fee for the advice provided by the new class of advisers (NCA). However, these fees must be episodic in nature – meaning, NCAs will be prohibited from charging ongoing fees or receiving commissions.
The scope of advice that NCAs can offer will be tightly controlled, with Minister Jones noting that a “blacklist” will be included in the legislation to restrict the areas of advice they can provide.
InvestorDaily understands that the delay in the second tranche of advice reforms stemmed from a dispute between industry super funds on one side and retail funds and advice stakeholders on the other, particularly over the proposed charging model for NCAs.
Retail funds, with their smaller size, were reportedly opposed to a collective charging model, which favoured larger industry funds. The government’s latest announcement is seen as a move to level the playing field, allowing funds to choose their preferred fee structure.
“This will allow a greater range of institutions to employ the new class of adviser, delivering neutrality across different advice models and expanding the supply of quality advice available to consumers,” Jones said.
The minister also acknowledged that the government expects “some licensees” to opt for indirect charging for advice services. This is widely anticipated to include industry super funds, a prospect that has raised concerns among advice and consumer groups.
These groups fear that such a model could resemble the controversial “fee for no service” practices of the past.
Namely, Super Consumers Australia CEO Xavier O’Halloran said in a statement on Wednesday that this approach encourages super funds to charge fees for no service and “flies in the face of the financial service royal commission reforms to end this practice”.
“We want to see greater transparency on the quality and use of advice delivered this way to prevent people’s retirement savings being drained by low-quality advice they may never use. This is a huge win for super funds, it will now be easier to charge their members for conflicted advice,” O’Halloran said.
Advice on select issues
The new class of advisers will be restricted to providing advice on products issued by “prudentially regulated entities”, the minister said.
“They will be prevented from providing advice on more complex topics, such as establishing a self-managed superannuation fund or advising on a managed investment scheme, through a blacklist to be prescribed in regulations,” Jones said.
This, he elaborated, will allow these advisers to focus on simple topics that most Australians would benefit from more information on, while also ensuring that there is a clear boundary between the new class of advisers and professional financial advisers.
“It is the government’s vision that the new class of adviser serves as one entry point to rebuild the financial advice profession, and the government remains committed to reforming the broader education pathways for financial advisers,” Jones said.
The minister also clarified that besides being prohibited from charging ongoing fees or receiving commissions, the NCAs will be held to the modernised best interests duty, aligning with the standards set for professional financial advisers.
“Anti-hawking restrictions will continue to apply, and the new class of adviser will be limited to customer-initiated engagement for new customers, ensuring they cannot be used to cold-call customers or offer unsolicited advice,” the minister said.
Licensees will also face additional monitoring and supervision obligations, backed by civil penalties, to ensure advisers operate strictly within their expertise and authorisation while adhering to the best interests duty and other requirements.
Super industry supportive of the changes
The Association of Superannuation Funds of Australia (ASFA) welcomed the government’s announcement, highlighting in particular the collaborative approach the government took.
“It was a true collaboration and testament to the broad commitment all ASFA members, associations and the government has to ensuring more Australians have access to help with their retirement,” ASFA chief executive Mary Delahunty said.
Delahunty said the group is particularly pleased to see that creation of the new class of advisers is accompanied by “strong regulations and consumer protections” to ensure high standards are maintained.
“These reforms are a clear signal of the government’s commitment to delivering better outcomes for Australians by addressing barriers to affordable financial advice,” she said.
“The future for Australians’ retirement savings is brighter with a more inclusive and modernised advice framework and we look forward to seeing the legislation progress in the New Year.”
The Super Members Council equally applauded the government, noting it will “better enable” super funds to help members to plan for retirement.
Super Members Council CEO Misha Schubert said: "Getting more Australians access to simple information and advice is the huge missing piece of the retirement puzzle, and the announcement is welcome progress in addressing the vast advice gap.”
She added that the group will “examine the legislation closely to ensure strong protections for consumers”.
“We look forward to working with government, Parliament and all key stakeholders to pass these crucial reforms.”
Separately, the Australian Retirement Trust (ART) said it sees “accessible, informed, and affordable financial advice as essential to giving our members confidence in their retirement”.
“We welcome these reforms to help more Australians access high-quality advice and make the most of their super,” said Simonne Burnett, ART’s chief member experience officer.
She assured that ART has an embedded robust internal process to prevent consumer harm in the process of providing advice.
“We believe consumer protection is paramount, and we welcome the government’s commitment to putting the needs of consumers first.”
Insurers welcome ‘win’
The life insurance industry expressed its strong support for the reforms, with the Council of Australian Life Insurers (CALI) stating that the “positive impacts of these reforms will be felt for generations”.
“This had to happen. We can’t continue to have almost 3 and a half million people in this country who are underinsured and unprotected when times get tough,” chief executive Christine Cupitt said.
“These reforms will allow Australia’s life insurers to provide a better customer experience to the millions of people they serve every day.
“Of course, this will only happen with strict consumer protections and appropriate qualifications to ensure that this is a reliable, trusted and safe choice for people looking to get advice about their life insurance needs.”
TAL group chief executive and managing director Fiona Macgregor said the reforms will help improve Australians’ access to affordable financial advice.
“We recognise that making decisions on financial products can be hard and believe that Australians should be able to access advice when they ask for it,” Macgregor said.
“Life insurance provides an important financial safety net for millions of Australians. But the reality is, many Australians remain underinsured and under-protected, unable to easily access the right advice to set themselves and their loved ones up for the future.
“Today’s announcement is a win for Australians. These reforms are critical to making financial advice more affordable and accessible.”
AIA Australia also congratulated the minister on his “ongoing work” to expand Australians’ access to quality advice.
“As a life insurance and advice provider, we want to be able to help more people to understand their protection needs as their lives change, to right-size where needed and to assist with affordability. We believe the government reforms will be a huge step towards meeting an underserved need in the current environment,” AIA Australia chief executive and CALI co-chair Damien Mu said.
But despite Minister Jones’ latest DBFO update, it is still unclear when draft legislation for the second tranche will be made available.
