Chris Pearce (Aston, Liberal Party, Shadow Minister for Financial Services, Superannuation and Corporate Law) Share this | Hansard source

I rise as a member of the Parliamentary Joint Committee on Corporations and Financial Services to speak on the report Inquiry into financial products and services in Australia. From the outset, I want to join with the chair of the committee, the member for Oxley, in acknowledging the disastrous consequences suffered by many people who had invested, in many cases, their life savings in the organisations which were probed by this review. I want to thank them for assisting the committee during such difficult and trying circumstances.

As the chair has noted, the committee is not a judicial body. Our charter was to investigate and review the current regulatory and legislative environment for financial products and services in Australia and to recommend any appropriate changes. I strongly concur with the chair’s comments that there can be no doubt that a number of individual investors were given advice from some organisations that was clearly inappropriate for them and their personal circumstances.

More broadly speaking, informing its view, the committee has taken into account all of the evidence provided relating to the high-profile collapses as outlined in the terms of reference. In addition, more broadly based evidence from across the sector was provided by many stakeholders about how the current framework may be improved so that greater levels of transparency and consumer protection are offered. It is important to note that, without diminishing the substantial negative impact many people experienced in the collapses considered by the inquiry, in general Australia’s regulatory system has served the community well. Every year there are many millions of individual transactions and interfaces which Australians have each day with financial products and services. Australia’s relative success, compared with others across the world, especially during the global financial crisis, is evidence that our system has in fact been robust and has worked well in the majority of cases.

The committee’s report has made 11 recommendations. Recommendation 1 is far reaching and substantial and recommends that the act be amended to explicitly include a fiduciary duty for financial advisers operating under an AFSL, requiring them to place their clients’ interests ahead of their own. If adopted by the government, I believe this would have the dual benefit of further improving consumer protection and lifting industry standards.

During the inquiry, there was much debate and discussion around conflicts of interest and the role that remuneration plays in managing potential conflicts. As many people are aware, the sector itself has proactively embraced the need for reform in this important area. The committee has recommended that the government consult with and support industry in developing an appropriate mechanism that will see payments from product manufacturers to financial advisers cease. Importantly, any remuneration structure in the future would clearly need to be compatible with the introduction of a fiduciary duty as outlined in recommendation 1.

Recommendation 5 suggests that the government consider making the cost of financial advice tax deductible for consumers. The recommendation would potentially encourage many more Australians to obtain professional advice when they would otherwise not have considered doing so due to the costs involved. Any initiative that encourages a greater number of Australians to seek professional advice regarding their financial future I think is a step in the right direction.

Recommendation 9 is also an important step in the right direction. The recommendation proposes that ASIC immediately begins consultation with the financial services industry on the establishment of an independent, industry-based professional standards board to oversee competency and conduct standards for financial advisers. Such an initiative would, without question, increased professionalism within the sector.

The critical area of financial literacy is touched upon in recommendation 11. This is an area where I believe strongly the stakeholders have responsibility to promote. No-one can doubt that it is critical that citizens both young and old are better educated about the myriad of financial products and services which are available to them. Recommendation 11 suggests that ASIC develop and deliver more effective education activities to groups in the community which are likely to be seeking financial advice, particularly those seeking it for the very first time. Quite clearly, there is no one silver bullet in what is a complex and ever-changing area of commerce. The adoption of this report will provide better outcomes, I believe, for Australians.

Tonight I join with the chair in expressing my hope and I am sure the hope of all committee members that the committee’s work will indeed further improve and very much enhance Australia’s financial services system.

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