Steven Ciobo (Moncrieff, Liberal Party, Parliamentary Secretary to the Treasurer) Share this | Hansard source

It was interesting to listen the contribution made by the member for Oxley, in particular as he railed against financial advisers. We will come to the point about whether he supports financial advisers. He said that what financial advisers were interested in, I think, was secret commissions and that they did not want their customers to find out, and that was the reason why financial advisers would be opposed to the two-year opt-in provisions. He went to great lengths to explain how those that invest their hard-earned savings were at great risk from shonky advice, conflicted advice, from financial advisers. But then, in true and typical Labor style, he turned around and said: 'But I support financial advisers. I think they're doing a great job.' He spoke at length about how people should effectively be fearful of the advice that they would receive from the financial planning industry in this country if it were not for Labor's big whopping red tape of FoFA and how consumers should recognise that if, in any way, shape or form, Labor's FoFA—

Mr Thistlethwaite interjecting—

Now they are being called 'shonks' by Labor members. They are calling financial planners shonks. So we see and we understand the exact way that Labor looks at the financial planning industry in this country.

Mr Thistlethwaite interjecting—

We understand that it might be well and good for the Labor Party and for their shadow minister in the area to stand up and to talk about how people are going to be exploited by financial advisers, and now we have the member for Kingsford Smith labelling financial advisers 'shonks'. We on this side of the House do not think that is appropriate. Granted, there is probably a very small percentage of people that do the wrong thing. We do not, for one moment, in the coalition think that everybody does the right thing all the time. But you know what: it is one thing to acknowledge that there is a very small percentage of people that have historically done the wrong thing and then a separate thing to label them 'shonks', as the member for Kingsford Smith has just done, or to say, as the member for Oxley said, that people that are investing money are going to be subject to investment advisers and financial planners that are giving them shonky advice, misleading them and are conflicted because all they actually want is a commission. That is not the coalition's approach and it has never been the coalition's approach.

When FoFA was first announced in April 2011, the coalition could not have been more clear in our response to it. We were broadly supportive of reform in the sector. However, we were concerned that Labor's reforms, if implemented in full, were going to lead to a massively increased regulatory burden, and that increased regulatory burden would result in fewer people having access to quality financial advice. Even more concerning, those people least able to afford to have access to financial advice—in other words those who might have a smaller lump sum of money to invest, those that might be lower in terms of demographics, struggling income earners et cetera—would be priced out of the market, effectively, as a result of Labor's FoFA reforms. From day one, the coalition made it clear that we believed that there was scope for there to be reform but that we thought that that reform needed to strike the right balance. Guess what: Labor also knew that their approach did not strike the right balance. I would suggest to all coalition members that the proof in that respect was the fact that the then minister, the now Leader of the Opposition, Bill Shorten, refused to subject the FoFA laws to a cost-benefit analysis and refused to subject the FoFA laws to a regulatory impact statement.

Why would the minister at the time have refused to subject the laws to a cost-benefit analysis or to a regulatory impact statement? I put it to you, Mr Deputy Speaker, that Labor did that because they knew full well that their laws implied a crushing, punishing, red-tape compliance burden on all of those in this sector. Labor had reached the point where they were unwilling to take any backward steps in the face of criticism from the industry and from a number of consumer groups that, as a consequence of Labor's proposal, we were going to see people effectively priced out of the market. As a consequence of Labor's reforms, we were going to see financial planners in a position where they had to incur significant charges and had to pass those charges on to consumers in order to comply with Labor's laws.

That is the exact reason why the coalition outlined our policy in very clear terms years ago. We made it clear that we would seek to address a number of aspects of Labor's FoFA legislation that imposed too much of a regulatory burden. At no stage have we watered down what is perhaps the single most important aspect—and often one of the most debated aspects—of FoFA, which is the duty to act in a client's best interests.

I heard just now the Labor shadow minister talking and railing once again about the best-interest duty. And do you know what, Mr Deputy Speaker? We have heard the shadow Treasurer scaremongering—I use that word advisedly, and I will explain why—about the best-interest duty. The shadow Treasurer does it. The shadow minister at the dispatch box just did it. They deliberately go out of their way to say to Australians, 'You should be fearful because the best-interest duty is being swept away by the coalition, and you're going to be left vulnerable.'

We have argued consistently that Labor is doing nothing more than scaremongering on this, but I think it is important that people do not just take the coalition's word for it. ABC News, in their ABC Fact Check service, made it crystal clear with the big word 'scaremongering' and a photo of the shadow Treasurer. The ABC Fact Check unit made it crystal clear that Labor was 'scaremongering'—the ABC's words, not my words. Those of us in the coalition know that from time to time perhaps the ABC and the coalition do not always get a perfect alignment, but in this particular case ABC Fact Check makes it very clear that the shadow Treasurer, just like the shadow minister at the dispatch box, is doing nothing more than scaremongering, because the very straightforward facts with respect to the best-interest duty are that the best-interest duty remains. The requirement for a financial adviser to act in the best interest of his or her client is enshrined in section 961B(1) of the Corporations Act. That stays in place. It remains unchanged. There is no amendment to that requirement at all.

As a consequence of the reforms that the coalition are making to FoFA, we want to bring about a series of modest reforms that reduce the amount of compliance that is required in order to meet the obligations of financial planners under FoFA. By doing so, the coalition will achieve an enshrinement of all the protections necessary for consumers but a reduction in the amount of red tape associated with FoFA—for example, the opt-in provisions, which the coalition outlined that we would abolish. The reason is—in fact, to some extent the shadow minister touched upon it—that financial planners are in regular touch with their clients regardless. The requirement to have financial planners writing every two years to all their clients, saying, 'Once again, can you please show that you intend to keep using us?' is a complete waste of time, a compliance exercise with no upside benefit whatsoever. Why would you impose that requirement on the industry when there is no upside for consumers?

Likewise, there have been allegations made by the Labor Party in relation to conflicted remuneration. Let us be clear: the government has supported the ban on conflicted remuneration and on commissions for financial advisers since it was first legislated, and that continues to be the case. At no point have we as a government sought to reintroduce commissions or conflicted remuneration for financial advisers. Once again, ABC Fact Check found that the Labor Party was scaremongering in relation to those claims as well.

I think it is important that in this debate we have proper, rational discussion about what has been taking place. Labor can whip up fear. Labor can whip up hysteria in the community. Labor can slander an entire financial-planning industry and say that it is only motivated by greed. But the simple facts are that the coalition recognises that the industry does an outstanding job, that the industry is motivated by the best interests of its clients, that the best-interest protections remain in place and that the ban on conflicted remuneration and commissions remains in place. The coalition's reforms simply seek to reduce the amount of red tape and compliance for the industry, which is good news for consumers and good news for financial planners.

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