Kelly O'Dwyer (Higgins, Liberal Party, Minister for Revenue and Financial Services) Share this | Hansard source

I would first like to congratulate those members who contributed to this debate—the member for Forde, particularly, and the member for Hughes. What an eloquent contribution you made to this debate. Your interest in this matter is well known. You have stood up for good financial advice throughout your career and it is great to see that you have been able to voice that here in the chamber this evening.

The Corporations Amendment (Professional Standards of Financial Advisers) Bill 2016 is intended to raise the professional, education and ethical standards of financial advisers. Over time, repeated instances of inappropriate advice have led to a reduction in consumers' trust in the financial advice industry. Reduced trust acts as a barrier to consumers seeking financial advice, which is a poor outcome for both consumers and the industry. I recognise that the majority of financial advisers have provided and continue to provide appropriate and high-quality advice to their clients. The measures debated today will help to rebuild confidence in the industry, which has been compromised due to the actions of a minority of advisers. Under the proposed legislation, financial advisers will be required to hold a degree or a qualification equivalent to a degree, complete a professional year, pass an exam, undertake continuous professional development and comply with a code of ethics. This is a momentous step forward. Under the new framework, financial advisers entering the industry for the first time will require a degree, while existing advisers will need to meet a standard equivalent to a degree. Existing advisers will not be required to return to undertake a bachelor's degree; they will be able to reach degree equivalent status by undertaking relevant bridging courses.

The new professional standards regime will commence on 1 January 2019. From this date, new advisers will be required to hold a relevant degree. This will ensure that, from the start of their careers, financial advisers are adhering to standards that are consistent with the provision of high-quality advice and in the best interests of consumers. Existing financial advisers will have access to transitional arrangements allowing them two years until 1 January 2021 to pass the exam and five years until 1 January 2024 to meet the education requirements. The transition period recognises that existing advisers may need to complete the education requirements on a part-time basis while continuing to service their existing clients. The government will establish an independent standards body as a Commonwealth company limited by guarantee to administer the new professional standards regime. It is anticipated that the new standards body will be established by mid-2017. From the date of the establishment until the regime commences on 1 January 2019, the body will be responsible for developing and setting the industry exam, developing the code of ethics and setting the education requirements. This is a tight but achievable time frame. The standards body will develop the exam, the code and the education and training standards in accordance with international best practice and will consult broadly with stakeholders throughout this process. All advisers, both new and existing, will be required to pass the exam and to undertake continuing professional development. The exam will test the practical and ethical knowledge of advisers and will represent a common benchmark across the whole industry. The exam requirement also lifts Australia's standards to a global level. The United States, Britain and Hong Kong, amongst others, require advisers to complete an exam before they are authorised to provide advice to clients.

A single uniform code of ethics will set the ethical principles that advisers will operate under. Professional associations and other independent third-party monitoring bodies will develop compliance schemes to monitor and enforce advisers' adherence to the code, and these compliance schemes will be approved by the Australian Securities and Investments Commission. The code will ensure that financial advisers are held to a high standard of ethics, with non-compliant advisers subject to disciplinary actions and sanctions. A key feature of the reforms for new advisers will be the requirement to complete a professional year under the supervision of an experienced financial adviser. Through this direct mentoring relationship, new advisers will be able to develop their technical knowledge and the soft skills critical to a client-facing role.

These proposed reforms follow important steps already taken by the government to improve the transparency and accountability of financial advisers. We have already established a register of financial advisers that allows consumers to verify advisers' credentials so as to be confident that the adviser is appropriately qualified and experienced. The proposed legislation will further enhance the register of financial advisers by allowing consumers to access additional relevant information about an adviser, such as where the adviser has been found to have breached the code of ethics and, if so, what disciplinary action has been taken in response to the breach. Consumers will also be able to search for financial advisers in their area by using a postcode or information about the financial adviser's principal place of business. This function is currently not available on the register.

The reforms respond to two significant reports: the Parliamentary Joint Committee on Corporations and Financial Services inquiry into proposals to lift the professional, ethical and education standards in the financial services industry; and the financial systems inquiry. Both reports were released in December 2014 and both recommended raising the professional, educational and ethical standards of financial advisers. These reforms have also been welcomed by the industry. Industry understands that these reforms are an important step towards the professionalisation of financial advice and will go a long way to building trust and confidence in the sector. The government will continue to consult with industry in developing the detail on these new standards so that the financial advisers have a say and a stake in the future of their profession. The educational requirements ensure that, in the years to come, financial advice will be considered, in the same vein as accounting or law, as a true profession.

Right now, we know that only one in five Australians seeks financial advice. This means that only one in five of us is receiving professional advice on setting financial goals, making the most of our savings and protecting our assets. The Turnbull government wants more Australians to have the confidence to seek financial advice, and that means making sure that people have access to financial advisers who will put their interests first and who are professionally competent and ethical. The bill will achieve this incredibly important objective for the benefit of all Australians and will play an instrumental role in renewing trust and confidence in financial advice. I commend this bill to the House.

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