DBFO now in legislative back seat
ANALYSIS
The Government appears to have clearly signalled that the collapse of the Shield and First Guardian funds has derailed the already snails-pace time-table applying to the further tranches of the Delivering Better Financial Outcomes (DBFO) legislation.
Thanks to comments by the Assistant Treasurer and Minister for Financial, Daniel Mulino, to a conference held by Investment Magazine we have learned that the Government’s priority is no longer DBFO implementation but, rather, fixing the structural problems which gave rise to the Shield and First Guardian debacles.
Mulino signalled that, as well, there is no longer any certainty about whether and how the Government might allow the creation of a new class of adviser because the Shield and First Guardian collapses have created new complexities which need to be considered.
From his comments, the minister and the Government seem to be more concerned about strengthening consumer protection than about delivering on the affordability and accessibility of financial advice.
In a very real sense, Mulino appeared to be signalling that he is being afforded limited legislative resources and that, in those circumstances, he will be focusing on delivering the results of the consultative process initiated last year around the Compensation Scheme of Last Resort (CSLR) and the linked CSLR post-implementation review.
Mulino has already made his call in terms of funding the CSLR cost over-run by levying the entire CLSR funding catchment, but he knows this is just a stop-gap measure and that long-term answers need to be found.
The reality for Mulino is, of course, that notwithstanding the consultative processes around the CSLR which will cease taking submissions at the end of next week, the answers to fixing the funding mechanism for the scheme have always been obvious – returning to the recommendations of the Royal Commission and the submissions of AFCA.
Indeed, Financial Newswire less than a month ago reminded readers that AFCA, in February 2020, said it strongly supported the “broad coverage approach’ outlined in the Treasury discussion paper, including locking in Managed Investment Schemes (MISs).
Shield and First Guardian were Managed Investment Schemes and, notwithstanding the involvement of some financial advisers, fraud was also a factor in the losses incurred by investors.
The systemic weaknesses and failings which gave rise to Shield and First Guardian were already know and most of the submissions received by Treasury have simply reinforced this. The necessary fixes require objectivity and political will.
The vast majority of good advisers, who are always focussed on delivering the best possible advice and support for their clients, have even more reason to blame those responsible for the misconduct that lead to the Shield and First Guardian disasters. Not only have they caused damage to the reputation of the profession and the prospect of a huge increase in the financial adviser bill from the CSLR, but now we are facing increased uncertainty about ever getting meaningful reform that will improve the efficiency of the financial advice process. What a terrible waste of what was a good opportunity.
There will be more damage done to the reputation of the financial advice sector when some of the ASIC legal cases play out in court. Reading some of ASIC’s descriptions of this wrongdoing is very revealing. The rest of the profession has much to be angry about. Have a read of this:
https://download.asic.gov.au/media/pldlilu4/25-274mr-asic-v-interprac-concise-statement.pdf