David Coleman (Banks, Liberal Party) Share this | Hansard source

I rise in continuation on this important legislation, the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014, which is before us today. As I was discussing earlier, there is a big difference between the approach of the previous government and the approach of this one. This government wants an orderly system of regulation in the financial advice space, but we do not want to regulate in such a way as to smash the industry and make the provision of financial advice so difficult and so onerous that fewer people do it. If fewer people are able to provide financial advice because of the regulatory burden, the price of that advice will go up. We have already seem the situation where financial advice is getting more and more expensive, and it is critical that we ensure that ordinary families can afford to get access to that advice.

That is why we do not support the previous government's 'boil the ocean' catch-all provision in relation to the best interests test. We have six very detailed steps that advisers are required to take under the Corporations Act. They need to conduct reasonable investigations; they need to ensure that they have the right expertise; they need to ensure that they get the right information from clients; they need to identify their client's objectives; they need to base all judgements on the client's circumstances; and they need to always act in the best interests of the client. But, after you have done all of that and followed that very onerous checklist, it is not appropriate to go on some sort of broad fishing expenditure to think about anything else at all that might be relevant in addition to the extensive list which you have just covered. That does not make sense and it will only lead to fewer people getting advice. Every time you make it harder to provide a service and every time you increase the cost of complying with regulation, costs go up—and who pays? Average families pay. That is not what we want.

The previous government was seeking to require people every two years to proactively opt back into their arrangement with their financial adviser. You can imagine that that is a very onerous requirement. We all have lots of relationships with service providers and business providers, and we are not required to go through a paperwork exercise every two years to reaffirm that relationship. If we had to do so, that would obviously lead to a lot of difficulty for those industries, a lot of unnecessary toing and froing and a lot of letters that sit in the mailbox unanswered. That is not good for the smooth operation of this sector. So we do not support that. Clients can of course opt out at any time. If you are not happy with the advice that your adviser is providing, get rid of them. Get rid of them anytime. But to require in this very centrally planned fashion for you to sign up every two years is not the way that markets work best and we do not support it.

It is also important that people can get general advice, often in the context of a bank or other financial services organisation, where the bank is not holding out that it will represent every single product in the market. If you walk into bank X there is a good chance that that bank is going to seek to offer you its products. People understand that. We have ensured that there is no conflicted remuneration. So people who do work in that situation cannot get commissions for the products that they make sell but, nonetheless, they can as employees be incentivised and receive bonuses—just as people can in pretty much any industry.

So the key message here whether it is scaled advice, the best interests test or the opt-in rule is very consistent. This is an important sector and it is important that it is well regulated and it is very important that it is not badly regulated and that we do not in the process of regulating it make it very difficult for the industry to succeed.

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