Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Hansard source

You do not know what I am saying the bias is toward. This further illustrates the minister's bias towards union dominated industry super funds. The minister is clearly conflicted and it shows. This is just more one example. Given the reliance of many industry super funds on the provision of intrafund advice for marketing advantage and the attraction of new members, we are concerned that the government has avoided defining and limiting the scope of intrafund advice because it has bowed to the interests of the union dominated super funds.

These coalition amendments ensure that all super funds will be able to continue to offer intrafund advice. Where this is advice is general in nature rather than personal and specific there will no change to existing arrangements. However, these amendments ensure a level playing field in the provision of financial advice whenever that advice is provided. The amendments achieve this by providing a new definition for personal intrafund superannuation advice. Such advice will be the subject to the best interest duty and all of the other consumer protections in the FoFA legislation. This will ensure that people who access such personal advice through their super fund will be afforded the same protections and safeguards as all other consumers of financial advice. Importantly, the amendments also ensure that the person who is accessing such advice will pay for the advice they receive, just like every other consumer of financial advice has to do. This will ensure that such advice is not cross-subsidised by other superannuation fund members who choose not to access advice through their super fund.

I now move on to amendments (3), (17), (18), (28) and (29). The coalition supports the ban on conflicted remuneration, which has the potential to influence the provision of advice. However, the wording of the FoFA legislation creates confusion, with the varied payments and the term 'volume based shelf-space fees'. Unlike a supermarket analogy, dollar based shelf-space fees are not paid for preferential placement on a menu but rather, for the administration of the fund manager's investment option, on the platform menu. The platform generally charges the same fee for each investment option on the menu.

In recent years volume based shelf-space fees may have been charged by some platforms of fund managers of preferential programs. There is broad consensus and agreement that these volume based shelf-space fees should be banned. However, volume based rebates have been consumed in the proposed legislation under the same definition as volume based shelf-space fees. Not only is this erroneous, but to simply ban these or to make the burden of proof in receipt of these rebates so arduous that it is hard to prove that they should not be banned is to potentially legislate preference for certain types of fund management structures over others. (Extension of time granted) We believe that this will lead to further undesirable consolidation and concentration in the financial services industry and will lessen competition—and the minister at the table knows that. Consequently, the end result of this bias will be a profound impact on the structure of the funds management industry and on the cost of investments for many Australians, particularly through their superannuation.

The coalition amendments are based on the recommendations made by the hardworking coalition members of the PJC and have the strong support of the financial services industry. Importantly, they give effect to the government's stated policy intention. We are doing the heavy lifting for the government, and they do not want to take it. We are providing the industry with a practical, clear and certain pathway forward as they implement some very dramatic changes to their business models to give effect to the policy intention in relation to volume based fees.

The amendments clarify the definitions of a fund manager, ensure that dollar based fees are not caught up in the ban on volume based shelf-space fees and permit rebates from fund managers to provider platforms in line with government announcements to ensure system neutrality in a retained consumer scale-benefit discount.

I now refer to amendment (4). One way of ensuring that consumers are able to access affordable and appropriate financial advice would be to allow advisers and their clients to limit the scope of the advice to a series of discrete areas identified by the client, rather than to mandate a full financial plan in every case. This concept of focusing advice to areas specifically identified by a client has become widely known as scalable advice. Numerous submissions to the PJC inquiry expressed concern that the wording of the best interest provisions in the proposed legislation does not allow for scaled advice to be provided. The government has acknowledged that the bill in its current form would prohibit scalable advice and it has proposed an amendment to the explanatory memorandum. This is typical. It is clumsy and it is confusing. Changing the explanatory memorandum instead of changing the legislation is ridiculous.

However, the coalition amendment explicitly allows scalable advice to be permitted within the legislation itself rather than the explanatory memorandum. This amendment will enable more Australians to access affordable and appropriate high-quality financial advice.

I now refer to amendments (5), (6) and (7). The coalition considers that a properly drafted best interest duty would enhance and improve the consumer protections afforded to clients of financial advisers in Australia by enshrining the principle that financial advisers must place their clients' interests ahead of their own when providing financial advice. However, we are concerned that the catch-all provision contained in section 961B(2)(g) would create uncertainty for both clients and their advisers and leave the legislation subject to potentially protracted legal arguments. This amendment removes section 961B(2)(g) to remove uncertainty about the practical operation of the best interest duty.

I now refer to amendment (8). This amendment addresses concerns expressed at the PJC inquiry by the Law Council of Australia, the Australian Bankers Association and other groups that the current drafting of the ban on conflicted remuneration is too broad and it is not limited to personal advice. The amendment expressly exempts general advice, such as the advice provided by bank staff on basic banking products, from the operation of the conflicted remuneration provisions. It is consistent with the government's policy intention that conflicted remuneration provisions under this legislation should only apply to the provision of personal advice.

I refer now to amendment (10). This amendment ensures that for a payment to be banned as conflicted remuneration there must be a causal link between the payment and the provision of financial advice. The amendment corrects yet another unintended consequence identified by coalition members of the PJC.

I refer now to amendment (11). This is another amendment correcting another anomaly identified during the PJC inquiry. It ensures that a financial advice business can be sold to employees of the business without the sale proceeds being caught up in the conflicted remuneration provisions. This is commonsense stuff. It enables proper succession planning by financial advisers and allows good employees to be rewarded with an equity share in a business without triggering the ban on conflicted remuneration. So this is saying to a small business financial adviser, 'If you want to sell your business to your staff here is an easy way of doing it.' But, no, FoFA catches them up and creates a triggered ban on conflicted remuneration. (Extension of time granted)

I now turn to amendments (13), (14) and (15). These amendments also arise from issues identified during the PJC inquiry. The current provisions of the bill allow training to be provided only in relation to the provision of financial product advice. It therefore seems to preclude other important and essential training, such as training on how to run a business, how to use software and issues such as equal opportunity and occupational health and safety. The proposed coalition amendments (12) and (14) would allow such broader but more important training to be conducted without triggering the conflicted remuneration provisions.

The current provisions in the proposed new regulations would restrict training to be provided only in Australia and New Zealand. As was pointed out during the PJC inquiry, this would be counterproductive as it would prevent Australian financial planners from attending events that would broaden their knowledge and keep them up to date with international developments. It would hinder our attempts to become a regional financial services hub. Come on! These guys on the government side have been talking about the Asian century; now they are saying that anyone who goes to a conference outside Australia and New Zealand does not get anywhere—it does not work; it does not satisfy the training requirements. No other profession in Australia is prevented from attending overseas. So our amendment (13) would ensure that these counterproductive geographical limits are removed from the legislation and would ensure that our financial service industry can remain world class in a world training environment.

Amendment (16) covers benefits to employees. This amendment clarifies that the limitation of a non-monetary benefit applies on a per-employee basis and addresses concerns expressed at the PJC inquiry that the current wording would impose a $300 limit across the whole of a financial advice business, irrespective of the number of employees the business might have.

I hope the Independents are listening to these. These are commonsense practical amendments that are fixing up the fundamental flaws. But it seems that they are, as I said before, Labor Independents.

Amendments (20), (22), (24) and (25) are consequential amendments that relate to making annual fee disclosure statements prospective. They remove the penalty provisions that apply to the sections proposed to be omitted by the third set of amendments.

I move now to amendments (26) and (27). The coalition considers that it is a fundamental expectation of any legislative reform that existing contractual arrangements should be recognised and grandfathered to preserve existing property rights. The financial services industry expressed strong concerns during the PJC inquiry that the grandfathering provisions relating to the ban on conflicted remuneration did not achieve this aim and that the wording in the provisions would create uncertainty for many of these existing property rights, in particular payments made by platform providers to dealer groups. These amendments to the grandfathering provisions of the bill recognise and preserve existing and longstanding property rights and ensure the commission payments from platform providers are not banned retrospectively.

Given that I have one minute, and that I am not sure that I will be on my feet again, I will take the opportunity to thank my colleague Senator Mathias Cormann and his office—Peter Katsambanis in particular—for their outstanding work. This is an extremely complicated bill that has been further complicated by the fact that there have been a raft of amendments in and out of the equation. They have done an outstanding job. It is a great credit to Senator Cormann, not only because he kept up with all of this but, importantly, because he was able to consult widely with industry. That leaf should be taken out of his book by the government—consult widely, not narrowly.

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