Natasha Griggs (Solomon, Country Liberal Party) Share this | Hansard source

I rise to give my support to the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014. Once again, the government has moved to cut red tape and improve consumer confidence, Australia-wide. These commonsense amendments to FoFA regulations will deliver more affordable access to quality financial advice by removing unnecessary and costly red tape, while still maintaining all of the important consumer protections that matter for consumers.

After Labor's changes to financial advice laws it became apparent that the protections for consumers were too far-reaching and, instead, inhibited financial advisers' ability to provide sound and cost-effective financial advice. The previous Labor government imposed unnecessary and costly red tape on the industry—which goes against the ethos of the coalition government and our plan for a prosperous economy and a return to higher consumer confidence levels.

Without higher consumer confidence levels, we will have low business confidence and low investor confidence. Consumer confidence can be a vicious cycle. The effect these changes will have on the confidence of financial advisers will see a flow-on effect right through to rising consumer confidence. The previous government's changes to the best-interest duty unnecessarily pushed up the costs of quality financial advice for investors and reduced competition, meaning less choice for consumers and, ultimately, less confidence. The changes, like forcing consumers to re-sign contracts every two years, are costly, unnecessary and, actually, do not provide any higher level of protection for the consumer.

The changes in this bill mean a client will still have the option to get out of their financial advice contract at any time they wish. If the coalition left these requirements in the legislation we would be allowing high quality financial advice to remain out of reach of the average Australian. And this is not good. Quite frankly, it is not good enough. The coalition wants every Australian to be able to access financial advice if they require it. Currently, financial advice is unattainable for most Australians, because the Labor government pushed up the price of quality advice.

The coalition is focused on lifting professional, ethical and educational standards, rather than overregulating an industry, to keep them honest. Financial advisers do a very important job in our society, and encouraging advisers to continue to educate themselves and value their ethical standards is far more effective than Labor's attempt to regulate, regulate and regulate.

Our changes provide the right balance for consumers and advisers, and have been backed up by the Senate Economics Reference Committee. Overall, the committee found that this bill achieves a proper balance between providing adequate consumer protection and sound professional and affordable financial advice. The coalition promised at the last election that we would restore the balance between important and appropriate levels of consumer protections, and make sure that access to higher-quality advice remained available and affordable for all Australians. We are now delivering on those commitments.

The coalition's commonsense changes to the FoFA legislation can be summarised like this: we are removing the requirement for an investor to keep re-signing contracts with their adviser every two years; we are simplifying and streamlining the additional fees disclosure requirements; we are improving the operation of the best-interest duty; and we are providing certainty around the provision and availability of scaled advice.

FoFA currently requires all new clients to renew their ongoing contract with their advisers every two years. This is known as the opt-in requirement. For advisers, having to obtain the client's agreement at least every two years adds an unnecessary and costly layer of red tape that the consumer has to pay for. That is something that the Labor Party is choosing to ignore, or they think that it is okay to push up the cost of financial advice to Australians.

The opt-in requirement actually offers very little consumer protection beyond what is already provided by the advisers. New clients will still continue to receive the fee disclosure statements which contain the same information that they need in order to decide whether they would like to continue receiving their adviser's services or not. I make this clear: clients can still opt out of a contract with a financial adviser at any time. I will say it again: clients can opt out of financial advice at any time they choose. Despite Labor's scaremongering, consumers are still able, at any time, to end their contract if they are unhappy with the service being provided to them or if they simply just want to change advisers.

All financial advisers' clients currently receive, and will continue to receive, a number of disclosure statements that show the fees paid to their advisers. However, making a hard-and-fast rule about providing fee disclosure statements to all clients will place an incredible cost on providing services for pre-FoFA clients. From feedback provided by stakeholders it has become apparent that it would cost almost twice as much to prepare a fee disclosure statement for a pre-FoFA client than for a post-FoFA client. Also, for pre-FoFA clients, little additional information will be provided on a fee disclosure statement due to the nature of payments of fees to their financial adviser. It is anticipated that, as time goes on, an increasing proportion of clients will be receiving a fee disclosure statement.

The coalition are also making changes to the best interests duty. These amendments will remove the catch-all provision in the best interests duty. Financial advisers are still absolutely required to act in the best interests of their clients. The unnecessary and costly red tape provisions, however, will be removed.

The best interests duty and related obligations will still require financial planners or advisers to act in the best interests of their clients, provide appropriate advice, warn the client if advice is based on incomplete or inaccurate information and prioritise the client's interests ahead of their own. Without the catch-all provisions, the best interests duty will continue to be sufficiently robust to ensure that advisers are still taking the necessary steps to properly consider the client's circumstances, conduct reasonable investigations into products that would meet the client's objectives and needs, and also exercise judgement in formulating the advice for the client.

The Abbott government has been open to suggestions from industry and consumers as to how further specific requirements could be included to improve the operation of the best interests duty. However, even the harshest critics of the change have not been able to provide any advice as to how to strengthen the provision—not even the Labor Party. This further cements the coalition's decision to proceed with the best interest duty as outlined in the lead-up to last year's election.

The coalition are also removing the catch-all provision from the best interests duty and facilitating scaled advice. Scaled advice can generally be interpreted as a form of targeted personal advice. For example, scaled advice may be provided when a client approaches a financial adviser for information on superannuation for themselves. Limiting the scope of financial advice to scaled advice can mean lowering costs to make this service affordable to a lot more Australians. This is because the adviser needs to consider fewer of the client's circumstances. Holistic personal advice can often be expensive, whereas scaled advice is an affordable avenue for many consumers seeking personal advice.

This common sense amendment to FoFA allows clients and their advisers to make a joint decision on the scope of the advice being provided whilst still ensuring the advice is appropriate for the client, as the advice will still be subject to the best interests duty.

To describe this, my colleague the member for Bowman earlier used an excellent analogy to describe our common sense approach to scaled back financial advice. He said, 'If you ask a builder to repair a faulty door in your house, should the builder have to do a structural check on the entire building or just the part he is going to repair?' Most would answer, 'Just the area the builder has been contracted to repair.' To conduct an assessment on the entire building would be an unnecessary cost and frustrating, expensive and—obviously—a bit of red tape. This does make sense to me. And these amendments are asking the same of advisers who are providing professional advice on one area of a person's financial story—for example, life insurance.

If I go to see a financial adviser to seek advice on what life insurance I should purchase and he or she needs to charge me for hours of work in order to understand my entire financial history, possibly I would think that to be overpriced. I think that would probably deter a lot of Australians from seeking advice on one area where their financial literacy might be lacking. These changes will allow financial advisers to provide low-cost advice services and enable more consumers to access advice.

Unlike the Labor Party, I think it is a good thing that financial services will become accessible to more people who might not necessarily be wealthy and have an investment portfolio. They might just want advice on life insurance and now they will be able to afford that.

I commend Minister Cormann for these changes to regulating scaled back advice and allowing Australians to be able to access high-quality financial advice in order to set up a financially secure future. Unfortunately, the Labor Party has spread a lot of misinformation about the government's improvements to FoFA and are being encouraged by the union-dominated industry funds, who have also been coordinating a campaign of misinformation.

Mr Deputy Speaker, can I say to the Labor Party—and there are some colleagues over there at the table: you are being most unhelpful. You are misleading the Australian public on the topic of financial investment and financial security. You are being irresponsible and your behaviour does nothing but confuse Australians when it comes to seeking financial advice.

The government's FoFA amendments do not water down consumer protections. They improve the quality of advice whilst building trust and confidence in the financial advice industry. Furthermore, these common sense changes will reduce costs across the financial advice industry by $190 million dollars a year—a $190-million-a-year reduction in costs that will filter down to the consumers. How the Labor Party continues to oppose these common sense changes is beyond me. Maybe it is because they do not have much common sense themselves.

We announced our policy to improve Labor's FoFA more than two years ago and we are doing what we said we would do. This bill is a start in unravelling the six years' worth of mismanagement and excessive government regulation that is the Labor Party's legacy. Again, I commend the minister and his team in their superb efforts in improving the FoFA legislation and in making financial advice more accessible to all Australians.

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