Bernie Ripoll (Oxley, Australian Labor Party) Share this | Hansard source

On behalf of the Parliamentary Joint Committee on Corporations and Financial Services, I present the committee's advisory report incorporating a dissenting report on the Corporations Amendment (Future of Financial Advice) Bill 2011 and Corporations Amendment (Further Future of Financial Advice Measures) Bill 2011.

In accordance with standing order 39(f) the report was made a parliamentary paper.

by leave—It is with great pleasure that I table this report on the future of financial advice in this country. The report is the culmination of years of work from a very wide range of stakeholders—key industry people, consumer representatives, government officials, experts, interested parties, regulators, the public and, of course, government and its representatives. This has been a full, open and very robust process aimed at the best possible outcome for consumers and for the industry at large. I do apologise, though, that in the short time I have available to me I cannot possibly cover what is in the report. I encourage people to read the report in its detail and I know that those who are very interested will do exactly that.

Today, with the recommendations of this report, I believe that we have achieved the gains and the goals that were set some years ago. This report finishes the work of the PJC in this area and helps support the biggest reform in the financial services sector in a generation. The report also confirms the need for change and the benefits it will bring to consumers with their life savings. It also opens the market for industry to grow with new opportunities. The FoFA reforms are about changing the culture and the behaviour of the financial services sector and refocusing that energy on the interests of consumers. The FoFA bills are the result of years of work by the financial services sector itself, individual organisations, the PJC and the government to address a changing financial services environment and the needs of consumers. I believe this is a case where it is a win-win for everybody involved.

The impetus for this legislation was the PJC's 2009 inquiry into financial products and services in Australia. That inquiry was, in turn, a response to the financial collapse of Storm Financial and Opes Prime, amongst other things; but, as we all understand, these were just one part of a larger jigsaw of all the things that are happening in the community, particularly in the area of financial services. I strongly believe that this legislation will achieve the goals that we set out to do.

The FoFA bills will not only enhance consumer protection but also promote professionalism in the financial advice industry. The FoFA reforms will significantly address a number of inadequacies principally, but not totally, through the annual fee disclosure, the opt-in and the conflicted remuneration provisions. These are key parts of the reform. The bills require financial advisers to issue a fee disclosure statement every 12 months and the statement must contain fee-and-service information for the previous and forthcoming 12 months. In addition, there is a requirement for financial advisors to provide clients with their renewal notice every two years. This is about re-engaging clients and re-engaging service providers. The best interest test in the second FoFA bill contains a general duty that advisors must act in the best interests of their clients—something sensible and overdue—and there is a requirement that advice given by providers must be appropriate to the client. This is another key part of the changes and the reform of the FoFA bills.

The best available evidence that we have suggests there is likely to be a short-term increase in the number of financial advisors before returning to levels broadly similar to and consistent with current employment numbers. While the total number of financial advisors will continue to consolidate, in terms of the FoFA reforms there will be a sharp increase in the provision of individual pieces of advice to individual consumers. Those numbers will double the estimated pieces of advice compared with what would happen if we did not make these changes.

I firmly believe that the costs of implementation and compliance for the industry are far outweighed by the benefits to consumers in the provision of high quality advice and transparency. This will also bring new opportunities to the sector, which cannot be overlooked. That said, I also appreciate that the next 12 to 18 months will be a time of some adjustment for many in the financial services and financial advice industry. The committee has also noted throughout its report that ASIC must assist with the compliance through publishing clear regulatory guidelines and detailing what is expected of the industry.

The FoFA reforms are the most significant and most important in a generation and are well and truly now due. FoFA has been, to a large extent, an evolutionary process from the old door-to-door sales of life insurance to the much more complex environment now of advice, services and products in a full advice type environment. But more needs to be done. The changes that are contained in the bills are filled with opportunity—opportunity for consumers to enjoy better protection, lower costs and high-quality advice that is more personally tailored through a whole new generation of opportunity for the sector. It will grow and will provide more individual pieces of advice. It is a good outcome for everyone involved.

Finally, I want to express my sincere thanks to all those people who provided submissions, who appeared before public hearings and gave evidence. I also want to thank quite a number of people in the committee secretariat for their very hard work—people who have changed over the time of the inquiry but who provided excellent service to the parliament. I commend the report to the House.

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