Michael McCormack (Riverina, National Party, Parliamentary Secretary to the Minister for Finance) Share this | Hansard source

I rise to speak on this matter of public importance about investor protections for consumers seeking financial advice. Our Future of Financial Advice reforms will make financial advice more accessible and more affordable. Let us be clear about exactly what the coalition is doing and why things have been put on hold for now. But, first, we can take on board some of things the experts have to say about this delay. The Financial Services Council, which represents wealth managers, says that the break will help the government better communicate the changes. Its chief executive, John Brogden—a good man—supports the delay and says he will use it to lobby for a better outcome. Industry Super Australia chief executive David Whiteley also welcomes the delay, and the seniors' consumer group, the Council on the Ageing, also welcome the decision. Ian Yates, chief executive of COTA Australia, says 'retirees cannot afford poor financial advice.' Frankly, there was a lot of hysteria about what people thought was in the legislation but here we have industry experts saying that the delay is a good thing. We heard the member for McMahon raving on about the government being dodgy and sneaky. We are not dodgy and sneaky. We consult and we take on board what stakeholders tell us. That is one of the reasons why these reforms have been put on hold for now.

We are not proposing to water down important protections. Reducing the compliance and regulatory burden for the financial advice sector, as for all sectors, has always been a top priority for the coalition. All these reforms to FoFA were clearly outlined prior to the last election. We released our detail and our comprehensive plan to boost productivity and reduce red tape in July last year, more than three months before the election. The coalition's concerns with the current laws go back to 2012 when these laws were first introduced. The coalition participated in the Senate inquiry and wrote a dissenting report. There was nothing dodgy and sneaky there. We committed to implementing all 16 recommendations of the dissenting report, if we won government. It might be news to those opposite that we did win government on 7 September. They seem to deny it, but it was us who won. The FoFA bill before the parliament, which is currently being considered by a Senate committee, was put out for consultation in the form of an exposure draft, and the bill reflects this. Particularly in relation to this policy we have been as accountable, transparent, open and consultative as any government could be.

We have been clear that a better balance needs to be struck. Some of the specific measures outlined in our FoFA changes included clarifying and not removing the catch-all best interests duty. The catch-all best interests duty as proposed by Labor led to uncertainty and confusion amongst advisers. Advisers would not know, under Labor's rules, whether or not their advice satisfied the best interests duty. The coalition is simply looking to remove the catch-all requirement in order to give the adviser confidence that their advice is compliant and will be in the best interests of their clients. We are removing the opt-in requirement, which forces clients to complete unnecessary paperwork—Labor loves paperwork—every two years simply to continue their arrangements with their financial advisers. The government will also streamline the current requirement so that fee disclosure statements need to be provided only to new clients. Under Labor's proposals, advisers were required to provide such statements for all of their clients, going back indefinitely—more paperwork which would undoubtedly put a significant financial burden on financial advisers.

We are cutting through the regulation; cutting through the red tape. A good regulatory regime is one in which those being regulated know what compliance looks like. You should not need a law degree or a tome on regulation to know your requirements and you should not need to look over your shoulder every time you sit down to conduct legitimate business. But those opposite do not understand business—they do not get it. The changes we are proposing—which were well-known and flagged well before the last election—are very pragmatic and well considered. Labor did not want to do a cost-benefit analysis because it knew it would not add up—I do not think that Labor knows what a cost-benefit analysis actually is.

Former Prime Minister Gillard gave the Leader of the Opposition, then Assistant Treasurer, an exemption from having to rigorously assess the costs and benefits of Labor's FoFA reforms. No scrutiny, no accountability, just full steam ahead—wham, bam, in you go. It is just like with the National Broadband Network, and we are now cleaning up the mess of that monumental disaster and trying to deliver the NBN sensibly and sustainably. It is just like the recent capability review of the National Disability Insurance Scheme, which revealed that Labor stubbornly pressed ahead, ignoring the recommendations of the Productivity Commission.

We have a number of very valid concerns with FoFA which we are seeking to address. The changes that we have flagged will certainly do just that. Under Labor's FoFA reforms, the up-front implementation costs to industry are conservatively estimated to be well in excess of $1 billion, with ongoing annual costs of at least $350 million. This is simply ludicrous. The current FoFA laws simply go too far, imposing excessive regulatory burdens on advisers, at huge cost to clients but for limited benefit to everyone.

It is worth noting that these laws would have never prevented a Storm Financial collapse. So, not only do these changes fail to achieve one of their main objectives; they also impose significant red tape and costs, which will hurt the industry and ultimately prohibit ordinary mum and dad investors or retirees from accessing affordable financial advice.

The government acknowledges that there is inherent risk involved in investing in financial markets and in financial products. Of course, we are committed to maintaining confidence in the sector and ensuring that consumers are adequately protected. However, Labor's FoFA laws just went too far. They do not strike a balance; they tip the scales. Consumers and the industry are equally the losers, and they know it. They are wise to this Labor opposition.

The government is quite sensible in drawing breath on the planned FoFA regulations. The minister has taken the right approach in postponing these reforms. Minister Cormann is precisely right to do just what he did yesterday. Given the complexity and the level of detail contained in the regulations, and the ongoing confusion and uncertainty by many in our community in relation to these reforms, this pause will give Minister Cormann the opportunity to undertake consultations with relevant stakeholders in good faith. Labor could never locate the pause button; they could only ever locate fast forward in relation to any legislation that they introduced over the last six years. That is why it is so important that we as a government are doing things pragmatically, methodically and sensibly.

During the last six years, those opposite just rushed everything through without any thought about its possible implications. Labor lurched from one policy disaster to another: between pink batts and overpriced school halls, between boat arrivals and the broken carbon tax promise. The coalition is actually committed to methodically and calmly implementing the agenda that we took to the people last September and is delivering on our commitments to the Australian people.

The coalition is absolutely committed to delivering these FoFA reforms, but we want to bring the people with us. We do not want to have policy by social media or to have policy by knee-jerk reactions—like those opposite did whilst they were in government under Rudd, then Gillard and then Rudd again. We do not change government policies in response to a television show, as with the live cattle fiasco, or to a Facebook post—we can only think of the supertrawler fiasco. We do not switch leaders. We do not haphazardly switch leaders in response to opinion polls. There is one opinion poll that matters and it was taken on 7 September last year. The voters voted overwhelmingly to put the coalition—the sensible people in politics—back into power. As I say, there is one opinion poll which Labor should listen to and that was the result of last year's election. The people spoke and the people now want the mandate that they gave to the coalition to be enacted. They want the Senate to get out of the way and remove the mining tax and the carbon tax, which are destroying Western Australia. The people in Western Australia can certainly get on board on 5 April and vote in the Nationals through Shane Van Styn and certainly the Liberals.

We will not be lectured by those opposite about financial management or financial priorities. Those opposite left us with $123 billion in deficits and, if left unchecked, $667 billion in debt, so they cannot lecture us about financial reforms. The International Monetary Fund survey found that Australia topped the list of 17 countries, with the largest increase in expenditure. How dare those opposite lecture us on financial performance. The IMF also reported that Australia has the third-highest growth in debt of any nation in the top 17 countries. What a disgrace Labor has left us. What an absolute mess we have inherited, but we will fix it up. You can laugh all you like, member for Fraser, but we will fix it up because we are the mature, sensible and methodical people in this parliament.

These reforms came on the back of Labor imposing a job-destroying carbon tax and a farcical mining tax which raised hardly a dollar, yet which Labor precommitted $16 billion worth of spending against. What a disgrace! When these FoFA reforms are ready, after we have taken due consultation with the people, they will certainly be brought in, but not until they are properly planned and properly thought out. Those opposite should take a lesson from how we do things.

See this speech in context