Pressure growing for full DBFO visibility

There is a growing consensus across the financial advice profession that the Government should pause the process around the Delivering Better Financial Outcomes (DBFO) legislation to enable full visibility of the intended final package.

The SMSF Association is the latest significant industry group to urge the delay backing up the Financial Advice Association of Australia’s concerns about signing off on the second tranche of the DBFO without knowing what is proposed in the all-important third tranche.

Responding to the Treasury’s exposure draft of the second tranche, SMSF Association chief executive, Peter Burgess said the Government needed to pause the current package and release the full suite of proposed reforms for comprehensive consultation.

“The pathway to legislative change is long and difficult, so we must get this right now. Partial reform risks making the system more complex, not less.”

“To achieve meaningful change, we need coordinated action — not fragmented rule-making that embeds more challenges for the profession,” Burgess said.

The SMSF Association response to the second tranche exposure draft warns that consulting on key reforms in isolation risks increasing complexity and red tape and ultimately the cost of providing financial advice.

“While we support reforms that aim to increase access to affordable, quality financial advice, these measures must be implemented collectively, not piecemeal, and they must maintain a level playing field for all advice providers — including the many small businesses serving SMSF trustees.”

The Association is concerned about the proposed collective charging model that allows large superannuation funds to deduct advice costs from member accounts — a luxury not available to financial advisers, who must charge clients directly and meet strict disclosure requirements.

“This model risks entrenching an unfair competitive advantage. Superannuation funds will be able to offer so-called ‘free’ advice when, in fact, the cost is being cross-subsidised across members,” Burgess said.

Further, without clear parameters defining what constitutes ‘simple’ versus ‘complex’ advice, the proposal opens the door to inconsistent application across funds.

The Association supports the policy intent behind targeted ‘nudges’ to improve retirement outcomes. However, it warns the proposed framework is overly complex and risks consumer confusion. Current drafting may mischaracterise general information as ‘superannuation-related advice’, potentially misleading members.

The Association also calls for SMSF professionals to be included in the nudge framework, noting their trusted relationships with clients and deep understanding of trustee needs.

“With more than one million SMSF trustees in Australia, it’s counterproductive to exclude SMSF professionals, who are uniquely placed to assist at key life stages, from being able to prompt clients to seek advice that’s right for them,” Burgess said