AMA: I'm Phil Anderson, GM Policy, Advocacy & Standards at FAAA, Ask Me Anything!

Have a burning policy question on DBFO or CSLR? Join me here on Wednesday 31st July from 2pm to 2:30pm.

With 12 years of experience in the professional association space working on the development and advocacy of major financial advice policy, I'm here to answer all your questions.

Start popping in your questions below ahead of time and Ask Me Anything!

Update: This AMA has now ended but please continue to pop your questions in the discussion forums and make sure you tag me at @Phil.Anderson

The FAAA is holding a webinar on Tuesday 6 August at 12pm AEST to hear from AFCA and the CSLR about how the CSLR will work. Please click here to register.

Find more posts tagged with

policy

Comments

rainier.reyes

Welcome everyone to an Advisely Ask Me Anything (AMA) thread!

Here's how to get involved:

Submit Your Questions: Type them out and post now ahead of the AMA! This is a text-based event, so no audio or video is needed. Whatever questions you have, Phil will be here to answer during the scheduled time.
Be Respectful: Keep it friendly and professional. Respectful dialogue makes the AMA enjoyable and informative for everyone.
Stay Engaged: Feel free to follow up or ask about different topics as the thread goes on. The more you interact, the richer the conversation.
Enjoy the Experience: Use this opportunity to gain insights and connect. Let’s make this AMA one to remember!

Looking forward to all your amazing questions and let the asking begin!

An exclusive badge is also available for participation in the AMA!

Phil.Anderson

I am really looking forward to doing this AMA. I am sure that people have lots of questions on DBFO and CSLR and would want to find out how they will actually work. Please give me your questions.

deborah

Im sure you will get plenty of questions @Phil.Anderson

craig.elliott

Hi Phil, what are you views with regards to Records of Advice (ROAs) going forward. If the SOAs are going to be reduced down to a much smaller document, will ROAs go completely or will they still exist? They are another document that takes up time and adds little (no) value to the Adviser / Client relationship.

primrose.foster

Keen to know, does the FAAA support the idea of qualified advisers?

fosca.pacitto

@Phil.Anderson In your opinion, what are the biggest wins for the advice profession in the DBFO Tranche 1 changes?

mat.tenison3

Hi Phil, firstly, thanks for all your hard work advocating on both areas! It's good to see some changes which will help with tranche one, but I think most agree the real benefits for advisers will happen in tranche two. When do you think this will likely get passed and how are the discussions going with Stephen Jones? Are you concerned about a change of government having a big impact?

anne.graham

Hi Phil - thanks for doing this AMA, I think we all learn something new every time we hear from you. Have you seen much interest in the qualified adviser options for super funds and the like? Are these businesses busily preparing for this option in the background, ready to launch or is this not a priority for them. In addition with the option of qualified advisers be restricted to a particular cohort or will it be an option available to all businesses. thank you

smithdarren24

Phil

Always love your work... DBFO, I have to admit I have been on the side lines of it and have seen a rollercoaster of emotion expressed from different commentators / participants ranging from excitement for the potential for real change both for advisers and customers in the early days to some pretty full statements of full disillusionment and disbelief with what has eventuated.

I have several related questions and I am hoping you can make it nice and simple for me to understand.

All I see and hear in advice practices now is pressure on of rising costs to deliver and serve customers, that is leading many practices to reduce/ limit the number of clients that they look after - how do the changes made here reduce these costs and when will the impact be felt.

In the next tranche ( date to be confirmed) what are the changes that will help reduce the cost to serve for those running advice practices. When are these likely to come in effect 2026/2027!

dela

Hi @Phil.Anderson . With the industry struggling to draw in new advisers, do you think the CSLR will deter new entrants further? What can we do to appeal to new advisers again?

Thank you!

ShwetaM1

Hi Phil,

Is there any chance we can have a statue of limitations on how far back one can go to make a claim? Claims that can pop up after 20 years is a bit much imo. We should be able to purge after 7 years similar to the accounting profession.

ShwetaM1

Hi Phil,

Isn't there an inherent conflict of interest with the idea of a 'qualified adviser'?

If the government was truely interested in providing Australians with quality advice, it is easy enough to have a panel of 'non alighned' advisers that super fund members can choose to go to.

By having 'baby advisers' how is the mess going to be any different to what we had with banks?

Also, I think the term qualified advisers is misleading. Almost giving these trainees the perception of being equal to a financial adviser or superior. Your thoughts?

ShwetaM1

Hi Phil,

Do you think we can get to a stage where there are standardised forms with the superfunds?

This includes fee processing etc.

Also, with us heading towards individual registration, the call for an onus to verify advise by the superfund trustee seems unnecessary. Your thoughts?

ShwetaM1

Hi Phil,

What is the purpose of CSLR really?

Builders simply close a company leaving the most important investment of families (their home) either poorly done or unfinished with no further ramifications - all they do is wind up one company after another.

I don't see this in any other profession. Don't doctors make mistakes or do 'wrong' leading to major financial consequenses?

What about lawyers or any other profession?

Financial planners seem to be taken to be wrong at face value unless they can prove otherwise and in hindsight. It can be that people cannot realise that they have been wronged for a many many years and one fine day start pointing fingers and want compensation.

odelia.dsilva

Hi Phil

Thanks for the good work. What is the Coalition's view on CSLR? What is the logic pollies use to backdate the start date? Why did Dixon's PI insurer not pay the claim? Why were the directors not affected? Can other advisers do the wrong thing and keep expecting honest advisers to foot the bill?

Phil.Anderson

Thanks Craig. That has not been a focus of the consultation so far, where most of the interest has been on what will happen with Statements of Advice. I assume that RoAs will be retained in some form, given that there is less in an RoA and it can be delivered verbally in many cases, without the need to provide a copy of the RoA to clients (although Licensees may mandate this). Verbal provision of advice, or at least no mandated written version, is more in line with the original Michelle Levy QAR recommendation and has strong merits.

The Government thinks that something needs to be given to a client when advice is provided, and thus they are talking about reducing what needs to be provided, rather than eliminate it. Wherever we land in terms of what needs to be in an advice document, I certainly hope that they will also look at what needs to be provided in the case of further advice, where advice has previously been provided. Hopefully improvements can be made in this area as well.

Phil.Anderson

Thanks Mat. Yes, whilst getting rid of FDSs will be a big outcome for some advisers (those who have not moved to 12 month fixed term agreements), the bigger gains are likely to be through Tranche 2 of the DBFO. There wasn’t much in Tranche 1 for risk advisers, other than the new client consent requirement and confirmation of the retention of commissions (although at the current levels). We see the rationalisation of the Best Interests Duty, removal of the safe harbour and the rationalisation of advice documents as the most important reforms.

There is still a long way to go in this process. I suspect that there is still some work (consultation) that needs to be done before the draft legislation is released and then there is still a period of time between that point and the tabling of the legislation in the Parliament. We remain in regular contact with Treasury and the Minister’s office.

In the Minister’s media release in response to the passing of DBFO Tranche 1 he said “The second tranche of reforms will further increase access and affordability of financial advice and will be developed over the second half of the year”. We obviously want it to happen as soon as possible, and with an election expected in the first half of 2025, we would like it to be fully resolved before the election. Unfortunately, there are no guarantees with this.

I am not particularly concerned by a change of Government, as the Opposition have said that they will fully implement the Michelle Levy QAR recommendations, so they will still drive change. The issue might be that there is a delay for them to transition into the driving seat. Thus, given the election is still as much as 9 months away, and a change of Government is not likely to deliver a significantly different outcome, we will simply focus on driving for change and working with whomever is in Government.

rainier.reyes

Welcome everyone to today's AMA!

Please ensure you read the instructions above before you post.

In order to see new questions and responses, make sure you refresh the page regularly.

Let me know if you need any assistance!

Phil.Anderson

The FAAA has supported the idea of a new class of advisers from the outset of consultation on this, however subject to some very important pre-conditions. We certainly do not support the ‘qualified adviser’ term, which the Minister has previously committed to us will change. Otherwise, we want to ensure that the scope of QAs is limited to simple advice and the education standard is much higher. We are also looking for a level playing field between QAs and fully qualified advisers, which is important. That would need to address whether financial advice practices are allowed to appoint them and charge for the services that they provide.

This is a very important issue, which we will be closely tracking. We will not provide our support to this proposal until we are certain that our concerns have been addressed.

Phil.Anderson

Thanks Fosca. The big win, although this is limited to those advisers who are on ongoing fee arrangements (which excludes those who have switched to 12 month fixed term agreements), is the removal of FDSs. I would suggest that those who are on 12 month fixed term agreements have reason to go back to ongoing fee arrangements to leverage the benefit of 150 days after the anniversary for clients to renew. They would no longer be bound by a requirement to get clients to renew before they get to the 12 month point. Another important win was the ability to move anniversary dates. I also think that we now have the chance to rationalise the fee consent process, via the development of a standard mandatory form. Ideally this will, before too long, become a digital process, where clients can approve an ongoing fee arrangement via clicking a button on an App on their phone.

There is merit in the ability to provide FSG information on websites, however I expect that licensees will be reasonably careful with the implementation of this.

There was nothing much of great interest in the Conflicted Remuneration changes and the client consent requirement for risk advisers, is really just locking into law something that is already a business practice. This is a once off consent and does not need to be provided to the life insurer.

Phil.Anderson

Thanks Darren. Yes this regulatory change process is slow and frustrating for those watching from the outside. I have been involved in regulatory change for over a decade and know that it takes time, and also appreciate that it is important to get it right the first time. It was nonetheless important to get the DBFO Tranche 1 changes passed, and this should give us confidence that the Tranche 2 reforms will be delivered. I like to remain optimistic about the future, and hopefully that is how it plays out.

In terms of business improvement, I think that regulatory change is critically important, however there is much more that can be done to deliver greater efficiency. The people that I talk to describe the huge difference between those practices who have good processes and those who don’t. So, I would like to say that regulatory change is not the only way to achieve real improvements. What practices need to be targeting doing is serving more clients with the same fixed cost base and reducing the cost of providing financial advice.

I think that there is an interesting debate underway as to whether there is a maximum number of clients that any one adviser can service. Some refer to the Dunbar principle which would suggest a limit of 150. Others suggest that with the benefit of technology, advisers should be able to service a lot more. This will be an interesting debate to watch play out.

I think the removal of FDSs, the rationalisation of the BID and removal of the safe harbour and the rationalisation of advice documents can deliver material improvements in efficiency. Along with technology and process improvements, I think these changes will be material.

In terms of timing, The ideal pathway would be for the legislation to be passed in early 2025, with a six to 12 month transition period. So we might be looking at commencement in late 2025 or early 2026. Please don’t hold me to this timeline.

Phil.Anderson

Thanks Anne. We have been engaged in discussions with super funds and insurers about the ‘QA’ option. I think they are open to the idea, however it is not yet clear on how this might work, so I assume that they are just at the thinking stage at this point.

Some people have expressed concerns about the banks getting back into financial advice. The big banks have been quite guarded about responding to this, and no doubt the memory of the Royal Commission is still fresh in their minds. The world has changed substantially since then, and most of them no longer have a wealth arm where they have products to distribute. I think for this reason, they are less likely to rush back into advice. However it is difficult to predict what will happen in the long term.

Michelle Levy recommended that it would not be possible to charge for advice services provided by a QA. This would mean that it largely only made sense for product provider entities with product margins available to pay for them. We have argued that it should be possible for advice practices to employ them and that their costs should be able to be covered by fees that clients pay the practice. This outcome is important to ensure that the playing field is as level as possible.

Phil.Anderson

Thanks Dela. I do think that the CSLR is another factor that could present an obstacle for new advisers coming into the advice profession. Who would want to be held financially responsible for poor advice that was provided by another adviser, even before you entered the advice profession. The CSLR levy, however is just one of a number of costs impacting financial advisers and it is likely to be less than the ASIC Funding Levy. There is a sector cap of $20m, above which the Minister must approve any special levy and where they have the power to allocate the additional levy to a broader range of sectors. We would hope that in any year where the financial advice profession hit that $20m threshold, that the Minister would make exactly this decision. In that case, based upon a total cost of $20m for the profession, the cost of the CSLR could be capped at around $1,300 per year per adviser in the worst case.

This is why we have to work so hard to encourage new entrants into this critically important profession. We all have a role to play in rebuilding the advice profession.

Incidentally, the FAAA is holding a webinar on Tuesday 6 August to hear from AFCA and the CSLR about how the CSLR will work. Please attend this if you would like to know more about the CSLR.

Phil.Anderson

Thanks ShwetaM1. Most of the complaints related to financial advice go through the Internal Dispute Resolution (IDR) process and the External Dispute Resolution (EDR) process that is managed by AFCA. The AFCA rules do have time limitations, including that the complaint must be submitted “within six years of the date when the Complainant first became aware (or should reasonably have become aware) that they suffered the loss”. There is also a further time limit that is applied – “where prior to submitting the complaint to AFCA, the Complainant was given an IDR Response in relation to the complaint from the Financial Firm - within two years of the date of that IDR Response”. These limitations are sensible and do protect advisers from facing very old complaints.

It is however important to note that it relates to when the client became aware that the loss occurred. It is possible that deficiencies in advice could result in losses arising some years later, so this is not the same as saying that there is a limitation of liability of six years from when the advice is provided.

Phil.Anderson

Thanks ShwetaM1. Yes there is definitely a conflict of interest in financial institutions appointing QAs and providing advice on their products. Conflicts of interest exist everywhere. In some cases, they are impossible to accept, whilst in other cases they can be managed. Let’s hope that the supervision and surveillance of QAs, when they commence, and on an ongoing basis, will be sufficient to ensure that the worst of what has happened in the past can be avoided. I certainly hope so as our members do not want to suffer reputational damage as a result of mistakes made by QAs.

My view has always been that QAs would provide the type of advice that fully qualified advisers would not provide, in that it was simple advice and the potential fees meant that they were simply not attractive clients. In this way, we would be talking about completely different consumer segments. QAs might be a means of these people getting simple advice that could make a meaningful difference to them, that they would otherwise not be able to get.

You might notice that I am not using the term ‘Qualified Adviser’, but instead referring to them as QAs. We objected strongly when this term was floated in December 2023, and we received a commitment from the Minister before Christmas that another term would be found. He repeated that commitment in a recent podcast that he did with Professional Planner.

alex.burke

Phil, I wanted to get your thoughts on a more equitable – or perhaps proportionate – distribution of industry funding obligations for both ASIC and the CSLR. Apologies in advance for the long question.

While the actual formula for determining sub-sector levies in the 2017 legislation is quite elaborate (and dependent on a bunch of seemingly circular definitions), the adviser levy appears to basically work out to something like (ASIC's costs - ($1500 x number of AFSLS)) ÷ number of current advisers on the FAR.

Obviously, this has resulted in substantial levy increases over the years, both due to post-RC enforcement activity and declining FAR numbers. What do you think needs to change in the underlying calculations to ensure a more sustainable industry funding model? Or is it just a matter of reining in annual expenditure for both ASIC and the CSLR?

Phil.Anderson

Thanks again ShwetaM1. I will say at the outset that I am a big fan of standardisation and technology enabled solutions. This should apply broadly across the financial services industry. It might be that we need some kind of data standard, so that we are all speaking with the same language. I think that this needs to cover issues like fee consent forms and third party authority forms.

Having mandatory standardised forms is one thing. Ideally however the best outcome is to do this in a technology enabled way. I would like to see a world where clients can provide third party authorities through an app on their phone and can dot the same thing for fee consent. This should be backed up by straight through processing, where the message is sent to all relevant product providers. We can only dream about what might be possible in the future, however I know that there are a lot of firms who are already working on solutions that are not that far off.

The need for oversight of advice fees goes back to the sole purpose test and has been followed through by APRA and ASIC since the Royal Commission. We need to accept that the sole purpose test has an important role to play, however it has got out of control in many respects. We do not support trustees reviewing SoAs and believe that there should be a better way of ensuring that the advice fees are appropriate and align with the sole purpose test. We have also argued strongly that it should not apply to clients in retirement phase who have already met a condition of release and can chose to withdraw their money whenever they chose to do so. Why should trustees have any role in this case?

It is difficult to avoid the fact that trustees do have an obligation in this space, however there needs to be a better, more efficient and less intrusive way.

Phil.Anderson

Thanks ShwetaM1. The CSLR is designed to ensure that clients who have been awarded a determination by AFCA, are actually paid, even when the firm becomes insolvent or refuses to pay. This is an objective that we can support, provided it is applied in a reasonable manner.

We are not aware of a similar scheme, however neither are other professions subject to an ombudsman arrangement with the powers that AFCA has. There are other forms of protection for clients in other fields including stockbroking, however what we have is quite unusual and very protective of clients. Some would argue that this is understandable given the critically important role that advisers play in the management of their client’s financial affairs.

We are certainly concerned that financial advice often takes the blame for what is basically a product issue, and we would argue that was at the core of what went wrong with Dixon Advisory. We also argue that the exclusion of MISs from the CSLR scheme, places an unfair priority on seeking fault in the advice that was provided. We can only continue to argue against the way this works and seek more comprehensive action by the regulators against product providers when things go wrong.

The FAAA is holding a webinar on Tuesday 6 August to hear from AFCA and the CSLR about how the CSLR will work. Please attend this if you would like to know more about the CSLR.

Phil.Anderson

Thanks OTF Curious Observer. The coalition are aware of our objections and are sympathetic to our concerns. I believe that they are supportive of our views on the retrospective application of the legislation and the Government being forced to meet it’s earlier commitment to pay for the first 12 months of the scheme. I expect that we will hear more from them on the CSLR over time.

The PI Insurer for the Dixon Advisory and broader E&P Financial Group has made a contribution towards the claims, which we understand is $12m. This is a tiny fraction of what the total cost will end out being. The problem with PI is that there is normally a cap and that it does not apply in a range of circumstances, including non approved products and after a business goes into administration. It will never provide the level of protection that we might want in the case of a black swan event like Dixon Advisory.

We would love to know the full reason why action was not taken against the Directors for what went on in the Dixon Advisory business. The answers that ASIC have provided so far in response to that question do not give us an explanation that we can accept.

The Dixon Advisory case sets an example of why there are important flaws in the design of the CSLR. It should not enable people to just walk away from an advice subsidiary and keep operating in another form. This is wrong. There needs to be consequences for this type of activity and the scheme needs to be fixed to ensure that this cannot be repeated.

The FAAA is holding a webinar on Tuesday 6 August to hear from AFCA and the CSLR about how the CSLR will work. Please attend this if you would like to know more about the CSLR.

alex.burke

Oh, one more if you have the time! I'll make this one shorter: I know Misha Schubert's comments were a couple of months ago now, but I'm curious as to what you think precipitated them – perhaps not hers specifically, but the general temperature before and during the passage of the first QAR bill and the comments we saw in the Senate.

To me, a lot of these talking points seem to be rehashed from the pre-Royal Commission (or perhaps even pre-FOFA) era. Why do you think the QAR reforms have reignited this debate?

Phil.Anderson

Thanks Alex. Let's deal with these two matters separately. With the ASIC Funding Levy, the number of advisers is critical. An increase in advisers numbers will have an automatic impact of reducing the levy per adviser. On the other hand, what has really driven the cost has been what ASIC spends on Enforcement. In the recently released set of numbers this is $19m, versus $6.5m for supervision and surveillance. On top of this, there is a significant allocation of overheads. In total Enforcement will be costing us at least $30m out of $48m. We only get one number and no additional detail. We know that we are paying a lot of money for unlicensed operators, which we strongly disagree with. In the past we have paid for matters where the connection to financial advice was weak. The lack of transparency on this is a problem. Also, when it comes to the fines and penalties generated by the enforcement cases that we fund, we would like the money to come back into the pool to offset the Levy

In terms of the CSLR, it is very early days, however the biggest issue at present is Dixon Advisory. That is a retrospective cost that we should not be paying for. Once the Dixon Advisory debacle is behind us, it will be up to the CSLR to get the operating costs down. Otherwise we need to do everything that we can to avoid future black swan events. This means reporting concerns about licensees to ASIC and ASIC taking appropriate and timely action to minimise the risk of consumer harm.

Phil.Anderson

Thanks Alex. I think it is important to put on record the fact that Misha apologised for that comment. It was not appropriate and it did not reflect how the very vast majority of advisers operate. The DBFO Tranche 1 debate got a bit challenging, however I think we landed in the right space and I trust all sides will accept that.

Yes there is a risk that we could go back to the bad old days of the FoFA and FoFA Amendment days. I hope that is not the case. The world is very different now and there is little doubt that the divides that existed in the past are simply much less relevant now. Our members work happily with all types of funds and we engage well with all types of funds as well. More work can be done by some funds to make them easier for financial advisers to work with, and we certainly hope that is a focus for them going forward. I think in this regard the future is much brighter than it has been and we should embrace the prospect of a world where advisers can happily work with whatever fund best suits the needs of their clients.