Ken Wyatt (Hasluck, Liberal Party) Share this | Hansard source

Listening to the member for Fraser I certainly got a sense of a strong case for financial literacy to be taught in secondary schools in the final two years. If there were that level of understanding then the informed consent choices that people make when they become adults would part of their lifestyle choices and it would be a pathway that they would choose in questioning some of the information given by financial advisers under any regime.

Today I rise to support the amendments to the Corporations Amendment (Streamlining of Future Financial Advice) Bill 2014. The future of financial advice reforms—more commonly known as FoFA reforms—introduced by the former government were a gross regulatory overreach that increased the costs of providing important services to Australians across the country. When the former government introduced the legislation in 2012, I spoke against this bill. It is of great satisfaction to me now to rise to speak on this issue in support of government amendments that will reduce regulatory costs, place downward pressure on the cost of financial advice to consumers and provide certainty to the financial services industry—a key commitment of this government at the election last year.

This bill will amend the statement of advice requirements, amend the definition of a basic banking product, extend the time for fee disclosure statements from 30 to 60 days after the client's anniversary date, provide a more targeted execution only provision, provide a more targeted general advice provision and include enhanced regulation making powers that permit regulations to prescribe when a benefit is or is not conflicted remuneration. By doing all of this, this bill will clean up the mess left by the former government. I remember when the former government introduce the FoFA legislation. I met with financial planners within my own electorate and spent countless time with them asking them what the changes would mean in terms of their business and the way in which their relationship with their clients would be affected by the exercise of process that regulations brings with it.

After the bill was passed and became an act, there were voluminous amounts of paper that planners were required to have in order to meet the regulatory requirements of the act. On one occasion, one financial planner pulled out a document and said to me, 'This is what I now have to fill in compared to what I had previously, and my advice to my clients has not changed. The quality and confidence that I have in getting the best possible outcome for them is still there, because I have kept my client base for years.' I found that with most of the financial planners within my electorate that I met and spoke with—that there was a high degree of trust and integrity and they made their best endeavours to make sure that the financial advice that they gave would give them the return that they were looking for. But we also have to factor in the fact that there are many external factors that come into play in financial investments, because there are other greater forces—both at a national and international level—that also impact on the return that you get for investments.

I was inundated with correspondence from financial planners and financial service providers concerned with the overreach and regulatory burden imposed on them by the federal government. As I said, to gain a greater insight into the issue, I did spend quality time with financial planners in my electorate. I said to a gentleman in Guildford, 'Just treat me as a new client and take me through the process.' It was interesting going through the process, because it gave me a better sense of what it was that I was expecting to ask him. But I do understand that many of us do not have the levels of financial literacy when we are given or gifted benefits that enable us to make a financial investment and so you solely rely on the advice that you get. In that sense, this bill will still protect people, but it cannot protect them from every possibility that might occur within a financial context.

I honestly could not believe the level of regulatory burden imposed by the government at the time. The difference between now and then is significant. As I said, there were pages and pages of unnecessary and repetitive regulation. At the time, I assured those providers in Hasluck that I would be raising this issue at every opportunity I had. We worked with constituents who raised these issues with me and liaised with Senator Mathias Cormann in his role to ensure that their concerns were passed through, so that when we gave consideration to any amendments in the act, their considerations would be part of the thinking of the minister and those who frame the amendments. That is why it is so pleasing to see the result of this today—a coalition government keeping its commitment to reduce red tape and make the regulatory system easier to use and to navigate.

When I spoke about this issue in 2012, I made the point that the financial services industry needs regulation—and I do not reconcile from that, because there is an obligation for governments to ensure that Australians are protected within the framework that operates. These amendments will have positive impacts for the financial services sector and consumers across Australia. Those opposite will and have been arguing that these changes dilute the need for a financial adviser to act in the best interest of his or her client. This is not true. The best interests duty is enshrined in subsection 961B(1) of the Corporations Act and that remains in place, unchanged. There is no amendment to this. The opposition overreached in the original FoFA legislation and now they are overreaching in the claims about this government's amendments.

When the government introduced the legislation in March this year, the Senate referred it to the Senate Economics Legislation Committee. On 16 June 2014, the committee released its report and the government agreed with the two recommendations: (1) That the explanatory memorandum include a paragraph to clarify the best interest obligations and the level of consumer protection they provide, and whether any further strengthening is require to ensure that these obligations cannot be circumvented; and (2) That the government consider redrafting the conflicted remuneration provisions to ensure greater clarity. The amendments to the bill and explanatory memorandum address the recommendations.

Unlike the former government—that all too often provided a knee-jerk reaction to policy issues—we have taken the time to properly consider and consult on these changes. Even though we have been receiving feedback since the FoFA legislation introduction in 2012, we undertook a public consultation on the exposure draft of this bill in January this year. On the additional amendments, we have once again undertaken targeted consultation. This is a considered approach to policy development and a stark contrast to the policy on the run approach embraced by the opposition.

I must take a moment to credit the Minister for Finance, Senator the Hon. Mathias Cormann, with much of the approach adopted by the government. I know the time that the minister has put into consulting and considering the FoFA legislation since its introduction in 2012, and now the amendments introduced to the House. Being from Western Australia myself, I have witnessed first-hand the interest and time he has given to this issue. I also know that he has met and discussed the FOFA legislation extensively with stakeholders in Western Australia, including many in my electorate—and I thank him for that. I want to extend my thanks to him for not only taking the time but also listening and acting on the concerns of those who raised them with him.

I want to take a moment to reflect on the changes to the statement of advice requirements that this bill further improves. These changes ensure that the following existing requirements are explicitly listed in the state of advice provided by financial advisers to their clients: that the adviser is required to act in the best interest of their client and prioritise their client's interests ahead of their own; that any fees be disclosed and that the adviser will provide a fee disclosure statement annually, if the client enters into, or has entered into, an ongoing fee arrangement after 1 July 2013; that a client has the right to return financial products under a 14-day cooling-off period in accordance with the requirements currently provided under division 5 or part 7.9 of the Corporations Act 2001; and that the client has the right to change his or her instructions to their adviser, if for example they experience a change in their circumstance.

Further, any instructions to alter or review instructions must be in writing, signed by the client and acknowledged by the adviser. And, that the financial adviser provide an explicit statement that he or she genuinely believes that the advice provided to their client is in the client's best interests, given the client's relevant circumstances. Additionally, there will also be specific requirements enacted by these changes so that the statement of advice is signed by both the adviser and the client. As evidenced, these changes will not only reduce regulatory burden and costs but also further strengthen and improve financial advice laws for the benefit of the provider and the consumer. This government is delivering upon its election commitment to unwind the regulatory overreach created by FoFA and to provide certainty to the financial services industry.

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