Bert Van Manen (Forde, Liberal Party) Share this | Hansard source

It's interesting listening to the member for Dunkley's contribution and I would agree with her on one point: the behaviour of the banks, particularly during the GFC, that ultimately led to the royal commission was reprehensible. As somebody who spent a career in the banking and financial services sector before coming to this place, it was extraordinarily disappointing that the banks didn't take in a professional manner their social responsibility and social license to look after their customers and assist them through an extraordinarily difficult time. That it had to get to a royal commission for some of those issues to be ventilated and articulated was equally disappointing. But the member for Dunkley's contribution also demonstrates my concern with those opposite and their complete and utter lack or apparent lack of an understanding of the financial services industry, particularly the advice part of that industry. Nothing in the member for Dunkley's contribution spoke to the substantive matters in this legislation, and it didn't demonstrate that she even understands the industry that we're talking about.

What I am pleased to see is, over the last 12 or 18 months since the royal commission, a move by the big banks to divest themselves of their financing planning arms. I've long held the view that if you provide financial planning advice you should not be able to be owned—or you should not be owned, full stop—by a product manufacturer, whether that's a bank, whether that's an insurance company or whether that's a fund manager, and even whether that's an industry super fund because they are also, ultimately, a product manufacturer. Advice should be completely separate from the people who create the products that advisers recommend.

The important part of this equation that gets overlooked is that advisers can only recommend a suite of products as per their approved product list. But there are professional advisers out there—and there are a great many. The vast majority of the industry are professional advisers who have been in the industry for 20 or 30 years or longer and have had clients who have been with them for that whole journey. It's a completely and utterly different model from the sales model that existed within the financial planning arms of the big institutional banks, in particular, and AMP.

Those people, the professional advisers who have run their own businesses for the past 20 or 30 years or longer, who deal with ordinary Australians each and every day and work with them to ensure that their financial goals and objectives are realised, that their wealth is protected and that they are able to achieve their retirement goals, focus not on the product. The most important part of the advice that they provide is the strategic advice that is designed to assist everyday Australians meet their goals and objectives. This is whether it's getting a mortgage paid down, whether it's saving or accumulating X amount for retirement, whether it's accumulating an investment portfolio within super or outside super or a combination of the two, or whether it's ensuring they've got the right mix in structure of insurance policies, both to protect their own personal wealth that has accumulated and their family's wealth should something unfortunate happen to them. But also, if they're in a business and have a business partnership, it's to ensure that they have the right structure of insurance products to fund their buy-sell agreements or their exit strategy should something happen to them. There are a whole range of pieces of strategic advice that professional advisers, outside of the banks, provide each and every day to Australians. They're the people I focus on, each and every day, because the majority of these people are small-business owners.

That is the point the member for Fisher was trying to make, in his contribution, that the member for Dunkley completely missed in her contribution. The member for Fisher was speaking about mum-and-dad Australians who have their own small businesses providing professional financial advice to other mum-and-dad Australians. They're the people who go out there each and every day and, just like the small-business owner the member for Dunkley referred to that the banks treated so shabbily and who has put all of their assets on the line every day, it is the same for these individual advisers and their small businesses. They do exactly the same thing. Their family's wealth is based on the value of the client relationships that they work on, based on the professional advice that they provide in a variety of areas. This is where this piece of legislation is so important, in that it seeks to ensure that we improve the level of disclosure with regard to the fees that advisers are charging their clients. This is critically important because it is important to ensure that there is complete transparency about the fees that an adviser is charging on an upfront basis but also on an ongoing basis.

Again, much of the fee-for-no-service issue that we saw out of the royal commission came from the big institutional players at that point in time. We heard very few if any instances of fees for no service for small to medium-sized financial planning firms that actually take the time and the effort, each and every day, to look after their clients. That's not to say that, within that part of the financial services sector, there aren't people who do the wrong thing. We should have a suite of legislation. And ASIC also, in doing their role, should ensure that those people are removed from the industry. I have no argument with that whatsoever. We do not want people in the industry who are not going to put the best interests of their clients first. They have a legislated responsibility to do that. Even before that, most of the professional advisers did that. Sadly, there are those that didn't.

This legislation is focused on improving that disclosure but also, at the same time, ensuring that what was potentially three documents that you had to give to your client is now a single document. We know, from the research and work done, that the more paperwork we give clients—and this was a piece of work that ASIC did a number of years ago—the less likely it is that clients actually read that paperwork. What we actually want is for clients to read the documentation that they are given so that they understand what they're paying for, what they're receiving and what the services are that they expect to receive as a result of the ongoing fees that they are paying.

Like the member for Fisher, I frequently meet with financial advisers, both in my electorate and more broadly, and we discuss these issues. I accept there's stuff in here that some in the industry would want to go further with. However, the reality is that these protections being put in place are designed to protect consumers, and the reason we need this legislation is that we have seen that there are those who don't put consumers before their own interests.

The important part of this legislation, though, in trying to take three documents and put them into one, is that also it helps mitigate one of the big issues that has faced the industry over the last few years, and that is the cost of the provision of advice. I acknowledge the work that ASIC is doing to try and understand how we can reduce the cost of advice so it's more affordable for a broader range of Australians.

So I commend this bill to the House, in its unamended form—because, as usual, those opposite have chucked in a few pious amendments. This bill, in schedule 1, will improve the disclosure by advisers for the personal advice that they provide to their clients under the ongoing fee arrangement. It also provides a degree of flexibility to the provision of the financial disclosure statement, and that's important because, whilst it sets a fixed anniversary date for their clients, we all know that clients' circumstances are not set in stone and that their circumstances might change or they might need to see advisers at different times of the year. But it's important that, in the totality of the service that is provided over the course of the year, the clients receive the services that the adviser says they're going to provide and that the fees charged are appropriate.

The new requirements will ensure clients are given a more frequent opportunity to opt in. In the current regime it is two years; it will go to an annual opt-in. That can be in hard copy but, importantly, it can also be in electronic form. So it creates some flexibility in how that written consent can be provided to the adviser and, subsequently, by the adviser to the fund manager, so that the fund manager has clear evidentiary documentation that those fees can be charged. These changes come in from 1 July 2021.

Other changes, which are equally important, include the disclosure around independence and any conflicts of interest. If nothing else, that's one of the things that came out of the royal commission—that lack of disclosure of a lack of independence, particularly by advisers within the bank network and their own adviser groups; people not understanding those links; and the consequent impact of the products that were recommended as a result. I think that is a good clarifying schedule in this bill. That makes the disclosure of independence more and more important. The last change relates to advice fees for MySuper products: where there's a specific piece of advice provided on a one-off basis, the fee for that advice can be charged from a MySuper product with the client's explicit consent, but ongoing advice fees cannot be so charged. There are a myriad of other methods by which they can be charged, though other investment accounts or via direct debit or other things.

I firmly believe that the financial advice industry is working towards becoming more professional and more transparent about what it does. It needs to do that to ensure there's the confidence in the Australian community for people to be able to go and get unbiased, independent advice. Importantly, that advice should be focused on the strategic needs of the client: what are their requirements to improve their wealth, protect their wealth or accumulate their wealth for the future? Once we get to an industry that focuses on those core needs and gives that strategic piece of advice properly, in a cost-effective manner that builds the wealth of everyday Australians, then we will have a professional industry. I look forward to seeing that day, but I commend this bill to the House as a step on the road to continuing to work with the industry to build that professional industry to provide professional advice to Australians of all parts of our country—those who have small account balances and those who have large account balances. This is the next step in what I think is a very good suite of legislation to come down the track.

See this speech in context