Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

I rise to speak on the Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016. Since the member for Higgins is in the chamber, it would be remiss of me if I did not move a second reading amendment, so I move the following second reading amendment as circulated in my name:

That all the words after "that" be omitted with a view to substituting the following words:

"whilst not declining to give the bill a second reading, the House:

(1) notes that in recent years, numerous cases of inappropriate financial advice have had a negative impact on Australian consumers' confidence in the financial services industry;

(2) notes that this lack of trust has become a barrier to consumers seeking financial advice;

(3) welcomes this continuation of the Future of Financial Advice reforms which were initiated under the former Labor government; and

(4) calls on current Liberal and National Party parliamentarians to apologise for the disregard their colleagues in the 43rd parliament showed for the many victims of bad practice in the financial advice sector when they voted against Labor's Future of Financial Advice measures.

Those of us on this side of the House sit in the proud history of reforms to protect consumers. It was a Labor government that introduced the Trade Practices Act in 1974, National Competition Policy in 1995, the Superannuation Guarantee in 1992 and the Future of Financial Advice reforms under the previous Labor government.

Labor recognises that regulation has to help the most vulnerable, not simply assist the most powerful. We remember the losses incurred by Australian families. As a result of the Storm Financial collapse, many lost their entire life savings. With Trio, many lost their homes. There have been financial scandals where Australians have not only lost everything but also ended up in debt.

In this context, it is critical to remember that there are many good financial planners in Australia who work hard in the best interests of their clients. For those financial planners, it is absolutely critical that the best standards of the industry are upheld. When someone goes to a person who calls themselves a financial adviser or a financial planner, they should be confident that they are going to an expert who can provide them with quality financial advice. This bill will restrict the use of those titles.

The Corporations Act imposes a general obligation on licensees to ensure their financial advisers are adequately trained and competent, and the Australian Securities and Investments Commission has issued guidance on the minimum training standards. But concerns have been raised that the current standards of ASIC's guidance are not commensurate with the level required to ensure appropriate technical and professional competence. As peak consumer group Choice put it, the requirement that financial planners have more qualifications was a 'no-brainer change'. Choice was quoted in the Financial Review last year as saying:

It had been apparent from a number of investigations that some advisers had very low education standards.

In some instances, ASIC's existing minimum education and training standards have not been applied consistently across the industry. The rigour and the quality of some training courses are questionable. The standards as they presently exist do not specify the duration or standard of training that advisers must undertake, and there are reports that some advisers purport to satisfy the requirements yet have only completed a few hours of studies.

In December 2014, the Parliamentary Joint Committee on Corporations and Financial Services reported on proposals to lift the standards. The committee considered the interim report of the Financial System Inquiry, which had noted significant issues with the quality of financial advice due, in part, to varying standards of adviser competence. The Financial System Inquiry highlighted consumer outcomes as a critical area for reform, and the committee's report noted that the issues relating to the competence of financial advisers remained unresolved. The parliamentary joint committee and Financial System Inquiry reports highlighted five main deficiencies in the current education and training requirements: that the current education and training requirements in the Corporations Act are low; that the standards are vague; that the standards are not holistic; that the stakeholders have raised concerns that the training requirements do not keep pace with changing market conditions; and that there is no central database with information about the quality of various education and training courses.

Currently, financial advisers are not required to adopt or comply with an overarching ethical code. This bill addresses some of these concerns, providing new education and training standards; transitional arrangements that apply to existing advisers; a new requirement that relevant providers comply with a code of ethics; an obligation on an Australian financial services licensee to ensure that its relevant providers comply with the new education standards and are covered by the compliance scheme; restrictions on the terms 'financial adviser' and 'financial planner' so they can only be used by persons who are relevant providers; amendments to the content requirements for the register of relevant providers; appropriate sanctions; and a new standards body.

We welcome the belated action from the government to improve the professional standards for financial advisers. But I am old enough to remember being in this place when we had to fight tooth and nail to stop the Abbott-Turnbull government from watering down Labor's Future of Financial Advice reforms, which had been praised by ASIC and which had opt-in requirements and fee disclosure statements, which this government claimed were red tape and too expensive for the big banks to pay for. Labor stood up against the government's attempts to water down the Future of Financial Advice reforms. We were pleased, as Australians were pleased, when the government finally dropped their wrongheaded attempt to scrap consumer protections in the form of the Future of Financial Advice reforms. They were great Labor reforms, opposed by the Abbott and Turnbull governments and stood up for by the Labor opposition. Thanks to our opposition, they continue to exist.

Indeed, the attempted scrapping of the Future of Financial Advice reforms says it all about the government's red tape repeal strategy. The original red tape repeal day not only attempted to get rid of the FoFA consumer protections but also attempted to get rid of the charities commission. I am delighted to inform the House that the Australian Charities and Not-for-profits Commission now enjoys bipartisan support. The Abbott-Turnbull government, after fighting tooth and nail to scrap the charities commission, has finally seen the light. It was a pleasure today to join Minister McCormack at a function here in the house with the Australian Charities and Not-for-profits Commission, presenting research to an ACT charities group, at which Minister McCormack reflected the government's new-found commitment to the charities commission—a body which can do genuine red tape reduction, as we are seeing now through the ACT, South Australia, Tasmania and, probably soon, Victoria; removing redundant red tape which affects charities. That is real red tape reduction. But the government's attempt to take away the FoFA protection was anything but and would indeed have thrown Australian consumers of financial advice into a world of pain.

We are going to continue to argue for a royal commission into the banks, because, while we are supporting this bill today, we do not believe that the government's attempts to make sure that egregious wrongdoing in the financial advice sector have been strong enough. Only a royal commission can get to the bottom of the culture and practices that have let misconduct in the financial sector continue to grow. We have seen some of those opposite, including the member for Dawson, say that they support a royal commission into the banks. And, on the last sitting day of last year, we saw this House come within one vote of supporting a royal commission into the banks. That shows you how strongly the Australian community feel about this. I am not one much for surveys, but I could not go by one survey which said that not only Labor voters but also coalition voters supported a royal commission into the banks. It is a measure which is past due. Only a royal commission will allow victims to be heard and identify the systematic changes that will ensure that we have strong banks going forward.

Labor supports this bill, but we believe that the government could go further. It is not good enough for them to back down on their attempts to scrap FoFA. It is not good enough for them to put in place these measures, sensible as they are. They need to support a royal commission, as Australians across the political spectrum are calling for.

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