Tim Watts (Gellibrand, Australian Labor Party) Share this | Hansard source

A core role of government is to protect the vulnerable members of our community. It is to ensure that people placed in a vulnerable situation are not exploited by those they seek advice from. A key example of one of these vulnerable situations is the provision of financial services. Most Australians seeking to invest their money are not used to the ups and downs of the financial market. They need independent, impartial advice on where their money is best placed so they can enjoy a secure future.

When advisers are incentivised through targets and commissions to recommend a certain financial product, despite the product's quality, it is hard for this independent advice to occur. In these circumstances there is a considerable risk of exploitation of these vulnerable investors. We saw this occur recently with the collapse of Storm Financial and other investment companies, where the savings of thousands of Australians around the country was lost as the questionable financial instruments they had invested in collapsed.

After the global financial crisis it was recognised that protections needed to be put in place for these vulnerable investors, so the previous Labor government initiated a parliamentary inquiry into financial advice, products and services. This inquiry produced the Future of Financial Advice Act to strengthen the protections for inexperienced investors. FoFA required that advisers providing personal financial advice must act in the best interest of their client. It required advisers to ask their clients to 'opt in' if they wished to receive ongoing service every two years. Most importantly it put a ban on conflicted remuneration. This meant that advisers selling a certain financial product were not able to receive a commission for the sale of that product to the investor. This ensured that financial investors would provide the impartial advice that retail investors so badly needed.

The Abbott government has wasted no time in attempting to role back these crucial protections for consumers who are seeking financial advice. Their attempts so far have been a classic example of how not to execute legislative change. This demonstrates to the Australian people once again the inability of the Abbott government to switch from opposition to government.

Firstly, they announced in the last few days before Christmas that they would make changes to the legislation. Like many Abbott government policy moves, this was done without any consultation with interested stakeholders. They did it without talking about the changes with consumer groups, or industry groups, or seniors groups. Clearly, former Assistant Treasurer Arthur Sinodinos pled that consulting his previous colleagues in the banking world was sufficient. Nothing else was needed to strip protections away from a vulnerable group of investors.

The Abbott government pulled out the usual tactic in relation to this legislation, which was to not talk about it in the hope nobody would notice it until it was passed. They did not count on the community backlash from industry experts, consumer advocates, seniors groups, and previous victims of dodgy financial practises, who all condemned the governments actions. Even those within their own party disowned the reforms.

Peter Collins, the former leader of the New South Wales Liberal Party, and now the head of Industry Super Australia, was unequivocal in condemning these proposed changes. As pressure from the community mounted we saw the response of the Abbott government shift back and forth, from supporting the changes to abandoning them, with the schizophrenic attitude of a government that just does not know how to govern.

The former Assistant Treasurer Arthur Sinodinos was asked to resign, as his failure to answer questions in the Senate became a thorn in the Abbott government's side.

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