Andrew Wallace (Fisher, Liberal Party) Share this | Hansard source

In my electorate of Fisher we are fortunate to have a highly professional and engaged local cohort of financial advisers. Even before the report of the financial services royal commission was handed down, these advisers reached out to me to help me understand their sector, the benefits that advisers deliver and the challenges that their industry faces. I've been determined to ensure that these concerns are heard and that, in ensuring that the public are protected from malpractice, the government delivers targeted, effective regulations without adding unnecessary red tape.

In December 2018, I hosted the then Assistant Treasurer in Fisher to meet with 40 Sunshine Coast financial planners to discuss their concerns and gather their experiences. In February 2019, I met with some 50 mortgage brokers in Mooloolaba, while in October 2019 I spoke with another 25 financial advisers. Between those times and now, I've had many further discussions with individual financial planners all over the coast and even presented to the local financial planners association early last year.

I've written to the Treasurer and to the minister for Superannuation, Financial Services and the Digital Economy on these issues, and I'm grateful to both of them for the serious consideration they have given to the concerns of my constituents and their businesses. Indeed, the minister for financial services has met with me many times on these questions and even took the time herself in July 2019 to come to Fisher and speak with local financial planners. I know that they appreciated the opportunity to be heard.

Financial planners have raised with me the question of the tax deductibility of financial advice. They've raised increases in ASIC charges for self-managed superannuation fund auditors and financial advisers. They've expressed disappointment at the new education requirements for experienced financial advisers and made me aware that some in the sector want an extension of grandfathered conflicted remuneration. Sunshine Coast financial advisers spoke to me about increasing regulatory costs, professional indemnity costs and the incongruity of third-party licensing in light of the royal commission's findings. In general, time and again they have highlighted to me the importance of ensuring that small, family owned businesses in this sector do not take the fall for the bad behaviour of large financial institutions.

I think it is really apt at this point to point out that those members opposite, those in the Labor Party, when they talk about the big banks and the Hayne royal commission, are oblivious to the impacts of the Hayne royal commission on small mum-and-dad financial planners. They talk about the terrible ills that the banks have perpetrated on Australians, and they were wrong, but what about the small, independent, mum-and-dad business operations that have worked in this industry for years and years? Without any form of discredit on themselves, those members opposite continuously talk about the big banks but you will never hear them talk about the small businesses that have been impacted. Now, I don't profess to be an expert in this field, but I do understand the importance of business and of the issues we're talking about, and I know that the minister appreciates them as well. Many of these questions have no easy solution. In every case a delicate balance must be struck between preventing a repeat of these bad practices that have gone on before and ensuring a strong sector that can serve those who'll need it most in the future.

The bill before the House today is another important step in striking that critical balance. This government understands there will always be a market for good, professional, sound financial advice. ASIC, after all, found the majority of consumers who seek financial advice do so because they feel advisers could recommend products that they could not find on their own. I know the government also understands that, from its beginnings in the insurance sales industry, in recent years, the financial advice sector has been moving closer to what the public are demanding it become—that is, a more professional sector akin to medicine and the law. I'm pleased to say that not one financial adviser I have met has quibbled with me about that very fundamental need—that is, the need for them to become more professional. However, given the important role these advisers play in our financial sector, self-directed improvement is no longer enough, and it is critical that the industry is held to the highest of standards.

In the light of the royal commission's findings, we must eliminate any misconduct. That's why the government committed to the Australian public to act on every one of Commissioner Hayne's 76 recommendations before the last federal election. It is an important matter of trust that, in this place, we live up to the commitment that we have made to the Australian people. To date, I believe the government has done so, while taking into account financial advisers' legitimate concerns. For example, in keeping with the royal commission's findings, the government has introduced a minimum educational requirement and an exam to ensure that, like doctors and lawyers, everyone in the sector has the same defined body of baseline knowledge, regardless of whether or not they have specialised during their career.

We're ensuring that every adviser in the country has the complete body of knowledge which underpins the profession and the professionals' capacity to competently and ethically practice. However, we have balanced this with the proper recognition that the experience of advisers should also be taken into account. That is why the government has stipulated that existing advisers need only complete an eight-subject graduate diploma rather than a full 24-subject bachelor's degree. In addition, the government has recognised that existing advisers need more time to meet these new standards. With the urging of many members on this side of the House, the government has introduced legislation, which means that existing advisers will have until 1 January 2026—that's two additional years—to meet the qualification requirements and one additional year until 1 January 2022 to complete their exam.

I want to thank Minister Hume for listening to me and my colleagues and stakeholders on these very important issues. The reforms in the bill before the House today are similarly effective in striking that balance. It is vitally important that there is transparency and clarity for consumers around fees when it comes to financial advice. We want to avoid the fee-for-no-service conduct we've seen in the past. However, just as importantly, we must not add unduly to the reams of paper that financial advisers are already required to provide to their clients when delivering any services. I'm sure we have all had the discouraging experience of being handed a thick wad of legal papers to read before purchasing a service we want and need. It is a simple fact of human nature that the greater bulk of fine print we are given to read, the less likely we are to read it and take it all in. How many Australians read the fine print when we're asked to agree to terms and conditions by Apple, for example? They provide reams and reams—in that case, electronic reams—of material. The more you provide and the more complex you make it, the less people will read it, and if people don't read it they will come unstuck. The more complicated we make the compliance for the adviser, the greater the risk for the consumer.

Under the reforms in this bill, financial advisers would be required to provide clients with a fee disclosure statement every year, which would detail the fees to be charged in the following 12 months and the services that the client is entitled to receive during that period. Critically, the bill would also require that clients provide active written consent to those fee arrangements going ahead, before any fees are charged. This will ensure the transparency that consumers need. However, just as important, under this bill these fee disclosure statements would take the form of a single document, delivered annually at a predictable time. The bill also removes the current requirement for financial advisers to provide a renewal notice to their clients. Both the disclosure statement and the request for renewal would be outlined in one straightforward document under this bill, preventing unnecessary duplication.

Equally, this bill provides for critical transparency by requiring financial advisers who are not independent, impartial or unbiased, as defined under the Corporations Act, to declare as much in a written statement to all clients before providing them with any advice. Failure to do so will incur a substantial civil penalty of up to three times the benefit derived or 5,000 penalty units. However, once again the bill prevents duplication by requiring the statement to be provided as part of the existing financial services guide, which is already mandatory in most financial advice arrangements.

Finally, under the reforms in this bill, unnecessary and unwanted ongoing advice fees from MySuper products will be prohibited, stamping out one of the more common fee-for-no-service arrangements identified by the royal commission. However, the government recognises that some members will want to see further financial advice, especially as they are approaching retirement. As such, the bill allows for non-ongoing fees to be charged where the individual gives their explicit consent. In each of its three schedules, this bill delivers on the financial services royal commission's recommendations and ensures that consumers have the protection they need. In each case, the schedules do this while listening to the industry and preventing the unnecessary duplication and bureaucracy which are making it increasingly difficult for advisers to service clients with lower value asset pools. That point was made continually to me by the industry.

The financial advice sector delivers much-needed services to every corner of the country and impacts the lives of every Australian in some way. The government's reforms are not just change for change's sake. They will make our financial system more efficient, more competitive and more trusted, for the benefit of all Australians. I know that many of the financial advisers in Fisher will remain concerned for their lower value portfolio clients. I understand they will remain concerned about their ability to service these clients whilst staying compliant with their new regulatory obligations. However, these changes are necessary to protect the public, and they are very timely. They are the right thing to do for the public and for the industry. In my experience with dealing with financial advisers, I've learnt that as a profession they are excellent at adaptation. They have had to be. This process will be no different. Strengthening the sector will benefit all Australians, as they will be able to access better quality advice that is affordable and helps them make good financial decisions. Strengthening these protections will ensure that Australians are receiving the best possible guidance. Ultimately, the reforms in this bill and all of those in the government's financial sector reform package are going to result in greater consumer confidence in the financial services industry and support the sector's ongoing place in our society in the years to come.

I will continue to work with financial advisers to consult. I will listen to their concerns and ensure that this government gets the balance right between the interests of consumers and those of their financial advisers. Members opposite continually talk about the big banks, but they always forget small business. Members of this government, the Morrison government, never forget small business. Small business runs through our veins. Most of us come from small business. We know what it's like to have to meet payroll on Thursday. We come into this place with that responsibility. We look at bills through that prism. We will continue to do so, and I commend this bill to the House.

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