The government wants to move onto the second tranche of Quality of Advice Review reforms and has no intention of rectifying issues raised by the advice sector over the first tranche.
In a post-budget media briefing, Financial Services Council CEO Blake Briggs told Minister for Financial Services Stephen Jones that the drafting of the bill “creates unacceptable legal risk for trustees”, and asked whether he was open to changing the provision as currently tabled before Parliament.
“We’d appreciate you looking at potentially amending those provisions to give regulatory certainty for the industry,” Briggs said.
Jones said he was aiming clarify the law to “affirm the status quo”.
“It was put into question as a result Michelle Levy’s review, and she put a spotlight on what she thought was a deficiency in the law to support status quo practice,” Jones said.
“What we are attempting to do is affirm status quo practice, not to change it but to affirm status quo practice.”
The DBFO bill sought to codify guidance from ASIC and APRA, but the advice sector has been critical of the provision, while super funds have been supportive, although the latter has still asked for more clarity over what their specific obligation will be.
“We think we’ve got it right,” Jones said.
“I’ve seen your advice, we’ve engaged with you and we’ll keep the door of conversation open. We think we’ve got it right, but we need to draw the regulator into this conversation as well. They’re independent of us of course but we need to bring them into the conversation as well and nail it.”
While the minister said the new law would codify existing obligations laid out by the regulators, Briggs pushed him on the disconnect between what the regulators have asked for previously and their recent comments.
ASIC and APRA have told funds to take a risk-based approach, but ASIC instead blasted them in a report last week for not checking advice files enough.
“There’s an extraordinary tension between them saying ‘trust us you only need to do a risk-based assessment’ but we’re going to use really inflammatory language to criticise the industry for their current practice, which is risk-based assessment,” Briggs said.
“I find it hard to see you can have it both ways at the same time – that we’re going to give a crack on one hand but then tell them the current approach is acceptable on the other.”
Jones said he wanted to avoid a “public exchange of barbs” on the issue.
“We’ve had an extraordinarily co-operative dialogue over all of the advice pieces, and I want that to continue and I don’t want it to be distracted where there is zero disagreement on policy,” Jones said.
Moving on
Jones said he wants to move on to the next parts of the reforms, noting the limited amount of Parliamentary sitting weeks between now and next may.
“I want to get this done, all of the pieces,” Jones said of the QAR reforms.
“The big work that will make a significant difference is the next tranche of work. I want to focus love and attention on that. I saw [advice fee deductions] as non-contro [sic].”
Asked whether something that hasn’t been announced or designed would be likely to have a shot at entering Parliament, Jones noted the limited capacity left for legislation to get through.
By having trustees supervise client-directed payments for their super funds smashes the core principle that retirees have full and unfettered access to their superannuation when it becomes unrestricted non-preserved.
Yet Minister Stephen Jones didn’t think there would be a backlash to the federal Labor government’s lurch into controlling how retirees can access their own funds? Next the trustee will provide oversight on how else retirees are spending their money; only one holiday a year permitted, forms seeking a detailed explanation for why lump sum withdrawals are being made etc.