Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for the Republic) Share this | Hansard source

Every Australian will rely on some form of financial services during their lifetime. Be it superannuation in their workplace, a life insurance policy, or advice from a bank when they are seeking to get a mortgage or a loan, everyone relies on financial services at some stage in their life. Unfortunately, for the past couple of decades in Australia, many Australians have been ripped off by dodgy practices and unconscionable conduct by people who had a power imbalance in their favour in the relationship between adviser and client in financial services. That, of course, led to the banking royal commission. That commission was resisted at every stage by those opposite in the early days. They didn't want to see the findings that were uncovered in the financial services royal commission come to light in Australia, because they knew that there were some bad practices going on. They were protecting their mates in the banking industry from having some of these insidious practices covered by not only the media but a royal commission.

That royal commission was very thorough and made a number of recommendations, and this bill delivers on some of those recommendations made by the Hayne royal commission. It contains three schedules which implement responses to four different recommendations made by Commissioner Hayne in relation to various aspects of financial advice. Schedule 1 relates to ongoing fee arrangements. This requires financial advisers to annually renew with their clients, through their express consent, the provision of those financial services. This comes about as a result of recommendation 2.1 of the royal commission, in which Commissioner Hayne recommended changes to fee renewal arrangements for financial advisers. Under the current law, these renewals can be taken biannually, and renewals are not required for pre-2013 arrangements.

We saw in the Hayne royal commission the result of that. One of the outcomes was that people were paying fees for no services, because they weren't sitting down on an annual or biannual basis with their financial adviser and going through the fees and commissions that were paid. They weren't seeing where their hard-earned money was going, in terms of those fees and commissions and renewing that advice for the next period of time. This recommendation deals with that, this legislative change deals with that and the proposed new law will require such renewal statements to include information about the service provided in the past year and the services that will be provided over the coming year, to make sure that there is more information and more transparency for people before they take on an advice relationship with a financial adviser in the future. That is a good thing.

Schedule 2 relates to a disclosure of a lack of independence and will require financial advisers to provide written disclosure of a lack of independence to clients. This implements recommendation 2.2 of the royal commission, which recommended:

The law should be amended to require that a financial adviser who would contravene section 923A of the Corporations Act … must, before providing personal advice to a retail client, give to the client a written statement … explaining … why the adviser is not independent …

This, of course, came up in the royal commission on several occasions, these murky arrangements that were in place between financial advisers, some of the platform operators and the companies whose products the financial adviser would recommend to a particular client. The client would not be aware that that financial adviser may be getting a commission from promoting that particular product to them or may be getting some form of financial benefit from that ongoing relationship with a product provider.

What is important in these types of relationships, where there is a fiduciary duty to act in the interests of the client, is transparency, ensuring that those relationships are disclosed to the client and that they go in with open eyes before they sign on the dotted line and give their consent to that adviser acting on their behalf. That hasn't been happening in the industry. It's one of the areas that Hayne recommended in his report needs to be addressed. The current law only prohibits advisers calling themselves independent, unbiased or impartial in certain cases where they receive benefits from financial product providers, commissions, conflicted remuneration and other benefits. It does not require a positive declaration of the lack of independence, and under the proposed law ASIC will be required to determine the specific requirements for this disclosure.

Schedule 3 relates to advice in superannuation. It increases restrictions around charging advice fees to a member of a superannuation fund. This implements the government's response to recommendations 3.2 and 3.3 of the financial services royal commission, which recommended that the government prohibit the deduction of advice fees, other than intrafund advice from MySuper products, and limit the deduction of advice fees from choice products. Many of the fee-for-no-service issues that were identified by Commissioner Hayne in the royal commission were in relation to retail superannuation fund providers—unfortunately, particularly AMP—charging advice fees to members. With many of those fees that were charged to those members, the member wasn't exactly aware that they were being charged. Across a particular platform and across a particular firm, this was happening on a regular basis.

This proposed law would prohibit superannuation trustees from charging members for advice without the express consent of the member. It would also prohibit superannuation trustees from charging ongoing advice fees to members of MySuper products. This doesn't prohibit superannuation trustees from charging one-off advice fees to MySuper members with their consent. It's worth noting that the proposed law differs from the recommendation made by Commissioner Hayne who recommended a strict prohibition on advice fees being charged to MySuper members.

Mr Dick interjecting—

The member for Oxley behind me says, 'It's the complete opposite.' It's worth noting that it differs from what Hayne recommended. Stakeholders in the superannuation sector, including the industry sector, are supportive of this model and it allows funds to provide advice to members in relation to key life events while prohibiting the provision of an ongoing fee for service. It later recommends that supporting this change in the provision of targeted advice at retirement with the consent of the member is likely to be beneficial to that member.

What is important is that we have a retirement income system that provides dignity for workers in retirement. The basis upon which Australia's superannuation system was established was to provide dignity for workers in retirement. It's about government basically saying to workers: 'Over the course of your working life, you've worked hard. You've added to the economic growth of our country as an individual and collectively. And for that we'll support you in your retirement through a tax concession, for you to save during your working life and to enjoy the benefits of that retirement when you reach the preservation age. Then you can pay off your house. You can make sure that you can have a holiday every now and then, and you can look after your kids and your grandkids.'

However, this government is attempting to undermine the notion of that dignity in retirement by attempting to look at cutting the legislated increase in superannuation that this parliament has committed to and this government has committed to on numerous occasions. During the last election campaign the Prime Minister gave a promise and commitment to the Australian people that his government would deliver a legislated increase in superannuation to 12 per cent for Australian workers. Now we see rumblings on their backbench and a number of members of this government starting to try and crab walk away from that commitment. They're even setting up websites, trying to harvest people's data, so they can run campaigns against the increase in superannuation that is legislated to occur for workers in Australia over the coming years. It is disgraceful because it's undermining retirement incomes for Australians but it's also a broken promise by this government to Australians in a very, very difficult time. In a time of a recession and coming out of it, the last thing you want to do is cut the retirement incomes of hardworking Australians and risk that dignity that they all deserve in retirement. That is exactly what this government is attempting to do.

Many members on the government's backbench are attempting to undermine the commitment to increase the superannuation guarantee in Australia. What that will mean over time is that the average Australian worker retires with less in their superannuation account, which will make it more difficult for them to plan for their own retirement, save for their own retirement and fund their own retirement, and it will obviate the need for people to rely on the age pension. Why on earth with an ageing population in Australia would we want to bring in a policy that makes it more likely that more Australians are going to have to rely on the age pension in their retirement to fund their retirement? It will create a bigger impost on the Commonwealth budget at a time when we're now racking up a record debt under this government where debt is going to go through a trillion dollars, where the budget deficit is going to blow out to hundreds of billions of dollars. Why would you want to create and bake in a system that's going to see larger budget deficits into the future because Australians don't have the wherewithal and the necessary minimum superannuation guarantee to plan for their own retirement? It makes no economic sense whatsoever.

Members of this government in the House of Representatives and the Senate—all of us—get 15 per cent superannuation. So it's fine for us to pocket 15 per cent superannuation, but this government's saying: 'No, we don't want to increase the basic rate of superannuation savings to 12 per cent for the average worker over the course of the next few years.' That is hypocritical and despicable, and it is letting Australian workers down. It's breaking an election commitment that this government said was set in stone and that the Prime Minister himself, on numerous occasions during the election campaign, gave to the Australian working people. Well, this Labor Party will campaign against the breaking of that promise. We'll campaign against ensuring that this government can get away with cutting the retirement savings of the average Australian worker and with not meeting the commitment that they gave to Australian workers over the course of the last election campaign to increase their superannuation savings at what is a very, very difficult time for the average Australian worker.

In conclusion, these reforms are important. They deliver on the Hayne royal commission's recommendations, particularly around providing transparency on advice that's given to clients before they sign up to a particular program of financial advice. But what is also important is making sure that Australians have the retirement incomes to be able to engage those financial advisers into the future, to plan for their retirement. If the government do get away with cutting the legislated increase in superannuation from 9½ to 12 per cent, they will be doing a very bad thing by the Australian people—by working Australians. They will again be breaking an election commitment. Labor will hold them to it and Labor will fight them every step of the way.

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