Bernie Ripoll (Oxley, Australian Labor Party, Shadow Minister Assisting the Leader for Small Business) Share this | Hansard source

Tomorrow is the fifth anniversary of the collapse of Storm Financial. It is the fifth anniversary of thousands of ordinary investors losing their life savings, many of them left with no opportunity to start again. It is important to keep this in mind as we consider the government's extraordinary and shambolic attempts at dismantling Labor's Future of Financial Advice laws. When it comes to financial advice, it is the classic story of David and Goliath: the consumers and retirees versus the big banks and institutions in the race to access the growing pile of $1.8 trillion in retirement savings and the many billions of dollars in fees and charges that brings in. It is a lot of money straight out of the accounts of ordinary retail clients who can least afford it, but it is never enough for the big end of town, who want more. To make matters worse, it is not just the fees and charges up for the taking; it is the culture it breeds of selling products instead of the more honourable task of actually providing quality advice and the impact that may have over a lifetime of saving for retirement.

No matter how hard they press the pause button, the government and the new minister replacing the former Assistant Treasurer Arthur Sinodinos will not alter the fear and uncertainty created by the proposals to roll back the FoFA laws—laws that only came into full effect nine months ago and have barely had time to be fully appreciated by the sector or the consumer. This comes after business models have changed and systems have been updated and modernised. Given either the complete misunderstanding by the minister of his own legislation and new regulations, or the minister's hope that no-one will read what the proposed legislation actually states in black and white, let us clear up a few details. Commissions are squarely back on the table, best interest survives in name only and a sales focus on financial products is the new push, with costs foisted onto retirees while the sector gets to pocket a few extra dollars in cost reductions as well as reaping hundreds of millions in extra charges.

Claims by the minister that this is all about efficiency, transparency and competition are laughable. Paragraph 2.27 of their proposed changes to fee disclosure statements explicitly details that a change to the existing fees charged, the terms of the agreement, or if the provider changes ownership, will not constitute a new arrangement and therefore no disclosure is required. That is a lot of change right there that blows a hole in the minister's transparency argument and in the pockets of retirees and consumers, and here the central problem remains that none of us get a choice.

When we consider commissions, page 28 of the explanatory memorandum of the bill sets out that commissions can be paid for general advice and provides the clarity the minister refers to on how it is done. Unfortunately for investors, the goal posts are set so wide you could drive a truck through them literally sideways. The minister claims that conflicted remuneration for personal advice is still banned. But this is not correct at all, because the proposed changes alter the definition of what is not considered conflicted remuneration on personal advice to include volume-based sales bonuses when they are part of a balanced scorecard approach. The minister can try all the tricks or call it what you will but it just does not pass the pub test. Providing quality personal advice and getting paid a sales volume bonus or a commission are incompatible.

One of the most important parts of FoFA are the best interest obligations through the safe harbour provisions in section 961B that provide a range of tests to ensure a balanced approach, with best interest part G being the catch-all provision that ties it all together and makes sense of going beyond the flick-through, simple, tick-a-box compliance cop out. This provision, perhaps more than any other, is driving a cultural change in the industry and lifting the standard of quality advice—something the sector wants and something the sector has been asking for for perhaps more than a decade. It is hard to explain why the minister thinks it is acceptable to remove a provision that a provider should take 'any other step that would reasonably be regarded as being in the best interest of the client'—and yet it is specifically removed by the minister. It might be fair to say that every once in a while the little guy gets a small win, even if only a temporary pause, while the question remains as to what caused the minister to stumble and rethink.

The government's FoFA roll-back process has been in shambles from the beginning and is now in disarray, with no-one sure of what happens next, not even the minister. The answer is clear, though. When you realise that you are travelling down a one-way street the wrong way, the best policy is to pause, think, and then turn around. This government has absolutely got it wrong on dismantling FoFA and the consumer protections that it provides, and there is no-one left that supports the government on these changes. Whether it is that over the weekend that changed the minister's mind or the Western Australian elections, I do not care.

See this speech in context