Ann Sudmalis (Gilmore, Liberal Party) Share this | Hansard source

This government has always supported the need to protect the financial stability and investment for Australians. The underlying principles were established so that workers and families who have worked hard all their lives know that what they have saved—what is commonly referred to as their 'nest egg', or the funding for their well-deserved retirement years—is secure. It is at this point that I wish to digress in order to publicly compliment those amazing people who have done exactly this. So many of our wise Australians have become self-sufficient and are grouped together under the heading of self-funded retirees. They are fully deserving of our respect and compliments for being such important role models for the next generation. These people come to me on my village visits and ask, with tears in their eyes, what they did wrong. They have worked hard and saved hard, and they are not taking benefits from the government. They ask that we help them to protect their investments. The crux of their issue at this point is that financial advice is becoming too expensive and that you need to be a solicitor to understand all the fine print in the booklets that they get sent in the post, not to mention needing a magnifying glass to read the font.

They know that we are not repealing the Future of Financial Advice laws, but, in line with the commitments that we made to so many groups, we are going to improve these laws, simplify them and ensure that investors are protected and that the legislation is less complicated. Most important is the introduction of best-interest duty to complement the common-law protections.

Let me take another moment to cite an occasion that has left an indelible impression. In the past, a licensed financial adviser during a time of world financial crisis—in fact, it was just prior to the recession in 1987—advised his clients that they should move their investments to safer portfolios, saving them from significant financial losses. You might wonder, apart from having a clear conscience, what other consequences occurred. That individual had his position declared vacant. But he was acting in their best interests. This introduction of best-practice duty is an honourable and well-overdue change. There is no intention of introducing landmine aspects, of financial advisers gaining commissions, or convoluted and difficult methods for seeing how they work and what the real costs to the investor are.

The most important proposals in the changes are to make sure investment advice is competitive, fair, efficient and transparent. The previous suite of legislative changes, which were aimed at protection, were complicated at best and anti-competitive at worst. Increased investment options means that different avenues can give a different range of benefits to the investors to suit their different needs. There are estimates surrounding the existing implementation regime that include a cost burden of around $350 million. Ultimately, this will be borne by the investor. The proposals being put forward have been assessed by the independent Office of Best Practice Regulation.

The previous parliament had bipartisan support to change this industry after the debacle of Storm Financial. Sustainable reform was the overall theme at that time, as recommended by the Ripoll inquiry. There were three key recommendations: the best-interest duty; that clients were fully aware of the conditions of their investments; and that difficult financial advice was made a whole lot clearer. However, there were unintended consequences for investors. They had to re-sign with their advisers, and this cost was part of their fee structure. Out of 400 submissions to the Storm Financial inquiry, only one—the industry super fund—recommended this step. Perhaps I am a cynic, but one wonders why only one from this source is supposed to be representing the best interest of the industry members, or, more simply, the workers they say they represent, when in effect they are gaining repetitive repayments at the disadvantage of the workers.

The best-practice duty requirement is an essential step for sound financial investment. It will provide security for those people who come to me and proudly—deservedly so—say, 'I am a self-funded retiree.' The proposed legislation does not reintroduce commissions. At the moment, investors are not ever able to opt out of a fund where they actually have no investments. This is such a complicated industry, with most of us finding it difficult to navigate. Also, determining a trusted adviser is very concerning, as there are many perceptions around the commissions of the past, which, I emphasise again, are not being introduced with these amendments.

There is to be a $90 million saving on the current implementation costs, and who would have been sustaining these costs? Why, the investors of course. The Financial Services Council has estimated that the burden on this industry is in the order of $700 million. Those opposite have once again demonstrated a complete lack of economic depth or ability to analyse financial impacts on the very people they have endeavoured to assist—yet another Labor mess to be cleaned up. Our aim is to make financial advice more affordable and more effective. The window of opportunity here allows time for more consultation— (Time expired)

See this speech in context