The process of the Quality of Advice Review (QAR) has now taken twice as long as the findings of Hayne royal commission at more than 834 days.
The report was first commissioned on 11 March 2022 and the final report was produced by Allens partner Michelle Levy on 16 December, although it took 54 days to be released to the wider public on 8 February 2023.
It then took 125 days for the government to produce its first tranche of formal response on 13 June 2023 followed by a second tranche on 7 December, some 177 days.
The latest development was a public hearing in the Senate economics committee on 13 June 2024 which featured appearances by ASIC, the Financial Advice Association Australia (FAAA) and the Financial Services Council (FSC). A report on the findings of these committee hearings was published on 21 June recommending Schedule 1 be passed.
In contrast, the Misconduct in the Banking, Superannuation and Financial Services Industry inquiry, more commonly known as the Hayne royal commission, took 417 days to complete.
It was first established on 14 December 2017 by the former governor-general Sir Peter Cosgrove to enquire into misconduct in the financial services industry, prompted by findings from a Commonwealth Bank whistleblower Jeff Morris.
In its Letters Patent, it requested that the interim report be submitted no later than 30 September 2018 and a final report no later than 1 February 2019.
Royal commissioner Kenneth Hayne, a former justice of the High Court of Australia, was assigned to the task and conducted seven rounds of public hearings over 68 days, called more than 130 witnesses and reviewed over 10,000 public submissions. Over half of these came from the banking sector, with just 9 per cent from the financial advice industry.
He then submitted his final report with 76 separate recommendations to the governor-general on 1 February 2019, and the final report was tabled on 4 February.
The legal process
It can be noted, however, that the Hayne royal commission occurred faster than a typical royal commission because of political pressure and its origins dated back as far as the Ripoll Report in 2009.
The recommendations for this became the Future of Financial Advice Reforms (FOFA) which were announced in May 2010 with a planned commencement date from July 2012. The first consultation papers were not released until late 2010, regulation in 2012 and they were finally passed through Parliament in early 2013. Further FOFA amendments were then made in June 2013 following an ASIC consultation on the regulatory guidance and these were passed in 2014, a process totalling around 4.5 years.
Even in the case of the Hayne RC, some recommendations made following the commission took longer to enact than others with the Compensation Scheme of Last Resort (CSLR) only being enacted this April.
By this measure, Ben Marshan, policy expert and founder of Ben Marshan Consulting, said the QAR is progressing at a “relatively average pace” given there are already parts of legislation before Parliament. He flagged it took 4.5 years for FOFA to be implemented, for example, and three years for the bulk of the Hayne RC to be legislated.
“Typically, laws take many years to develop, pass through Parliament, and implement. Usually, there are discussions, reports or committees that take evidence, have hearings, and make recommendations for six to 12 months, another six to 12 months for the government to decide what it will move forward on, six to 12 months for the laws to be developed and consulted on through a Department (typically Treasury for financial advice), three to nine months to get through Parliament, and a transition period to implement.
“From this perspective, the QAR is progressing at a relatively average pace and arguably even ahead of schedule, given there are already parts of the legislation in Parliament around 2.5 years from when it commenced.”
QAR progress
As for the QAR, now known in the draft legislation as Delivering Better Financial Outcomes, the legislation process is only halfway through as there are still issues to be worked out in the second tranche of reforms. These are expected to be provided by “mid-2024”.
Speaking on 20 June, Phil Anderson, general manager for policy, advocacy and standards at the FAAA, said the organisation was growing “nervous” about whether all the measures would be complete by the deadline.
Minister for Financial Services, Stephen Jones, has committed to a deadline of May 2025 in light of the next federal election.
Anderson said: “We were expecting the draft legislation [for tranche two] around the middle of this year. During the hearing last week, the FSC put the view forward that this meant by 30 June, but our understanding is that’s not going to happen.
“There are still a lot of very contentious issues to be resolved in tranche two, there’s more to play out in terms of the consultation, so I think it will be a couple of months before we see draft legislation. That does make us a little bit nervous about when this will get through Parliament.
“We are now into the third year of this term and if they do go early, there are risks, so we want to make sure it does move forward as quickly as possible and gets finalised, but there’s some really intense stuff to be resolved before this one is ready.”
This includes the use of the term “qualified adviser” and the scope of the advice they can provide, and the requirements for a new record of advice to replace a statement of advice (SOA).
Marshan recommended that advisers were proactive and did not delay making any changes in the hope of a speedy passage for the QAR.
“Laws take time; they only solve some of the issues you hope they will, and ultimately end up being a disappointing outcome. If you want to improve your business and advice process, don’t wait for the QAR changes; start looking at where you’ve implemented ‘compliance’ and ‘risk’ measures that are significantly more inefficient and time-consuming than what the law requires you to do. You’ll make considerably more improvements to your business than what QAR might deliver.”
