Stephen Jones (Whitlam, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

[by video link] In my first few months as a freshly minted MP, I had the very distressing experience of having to meet with hundreds of constituents of mine who had worked their entire life to accumulate a retirement nest egg—most of them through a well-managed industry superannuation fund that had accumulated good returns over the terms of their working life. Tragically, they succumbed to the siren calls of one particular local financial adviser who sold them into a financial product which was being touted by a business—which we subsequently learnt was run by a bunch of fraudsters—known as Trio. They lost their entire life savings, every last cent of it. And they were not alone; there were thousands of people like them around the country. Whether it was Opes Prime, Trio, Storm Financial or many of the other spectacular corporate collapses of the first decade of this century, hardworking Australians lost their life savings, with no compensation, due to unprofessional and downright dodgy financial advice and they had no recourse.

It was because of this that Labor established an inquiry into the financial advice system and established an inquiry into what had gone on with Opes Prime, with Trio and with Storm Financial. We commissioned the Parliamentary Joint Committee on Corporations and Financial Services to investigate and make recommendations. The final report, named the Ripoll report, after the then chairman of that committee, made a number of recommendations which were taken up by the Labor government. We established in law a statutory best-interest duty for financial advisers, requiring that they act in the best financial interest of their clients. We established an obligation that fees had to be based on an explicit permission given annually by a client for those fees to be extracted. We enhanced the power of ASIC to ensure that they could police the advisers and ensure that they had more powers to ban advisers who were acting unprofessionally or unscrupulously. We put a prospective ban in place on trailing commissions and we made a recommendation that professional standards be established for the financial advice industry.

What's remarkable about all these changes in the first instance is that it took so long for these rather modest changes to be put in place, essentially turning financial advice from what had once been an emanation of a sales force from the large-life officers of this country into a truly independent and professional body—a profession of financial advisers. It was remarkable that it took so long, but, in terms of the federal parliament, what was also remarkable was that the coalition parties opposed the FOFA reforms and vowed to unwind them if they ever achieved government—and they attempted to unwind them. In fact, in the first two years of the Abbott government they put in place a number of measures which wound back those original FOFA reforms. They intended to do much, much more, but events took over. We had, after much resistance from the coalition party, the Hayne royal commission, which was a watershed in the way the public got an insight into the industry and what needed to be done to reform that industry.

This bill before the House recommends what is now a nearly three-year-old commitment by the government to implement recommendation 2.10 of the banking royal commission. It does so by expanding the role of ASIC's existing Financial Services and Credit Panel to operate as the single professional and disciplinary body for financial advisers. It also creates new penalties for advisers who breach their professional obligation and introduces a new two-stage registration process for financial advisers. It completes the wind-up of the coalition's failed Financial Adviser Standards and Ethics Authority, removing its power to set professional standards for financial advice. I'll return to this in a moment.

It is worth noting that this bill has been examined by the Senate economics committee and has received bipartisan endorsement by that committee; that's a good sign. It means that Labor will be backing the bill. We also support the bipartisan recommendation by coalition chair Senator Brockman and his committee to ensure that there's a proper review of this legislation in two years time. There can be no 'set and forget'.

No-one can see any of these changes and what has emanated over the 12 years since the Ripoll report as anything more than a public policy failure and an enormous admission of failure by the coalition government. The government's management of financial standards reform has been a slow and painful trainwreck not just since the banking royal commission but since the 2016 parliamentary report, a bipartisan report by the corporations and financial services committee, that recommended professional standards reform in the financial advice sector.

I just want to repeat this point: it's been 12 years since the Ripoll committee said we needed financial standards. It has now been five years since the 2016 bipartisan parliamentary report by the PJC, which recommended professional standards. That's two parliamentary bodies that have said we need professional standards. And it's been two years since the minister, Senator Hume, had to—in a gross admission of failure—introduce a bill into the House to extend the already-generous time lines for implementing the new professional standards and the tests required. So: 12 years since Ripoll, five years since PJC and two years since the government had to, in an embarrassing admission that it had completely stuffed up this whole area, extend the time lines for implementing new professional standards.

And now, today, we have the abolition of FASEA, the administrative body that was established in 2019 under the then Treasurer—the current Prime Minister—which stands out as an abject failure in public policy and in administration and a failure amongst failures. They went through three CEOs in their first 18 months. They failed to produce standards in a way that was in any way timely or done in an adequate fashion. Advisers themselves were tormented with changes and complications to the exam process, and they were set standards and tests on things that had, in many instances, absolutely no bearing on the professional work they were performing in their practices. That says all you need to know about this Prime Minister: big announcements but no follow-through—an abject failure in public policy. Labor has always been in favour of reforms that are going to support a professional consumer-focused financial advice industry. But the government's implementation of those reforms has demonstrated nothing other than reckless incompetence.

I want to pause to point out that financial advisers are a constituency where, if you took them as a whole, you would say that there are probably more Liberal voters amongst them than Labor voters. This is a constituency the coalition likes to think of as their own, but they have treated them so appallingly, not only in the design and implementation of professional standards but in the ongoing incompetence in the administration of this profession. It is no wonder that members of this profession are standing up and questioning their lifelong commitment to Liberal Party policies or Liberal Party governments. They are asking, 'Why are we backing these guys when, every step of the way, they have sold us down the river and shown monumental incompetence and a lack of understanding of our profession and our industry and what is needed in order to properly regulate it?'—to remove those people from the profession who we all agree do not belong and ensure that financial advisers can do the critical job that is needed to provide Australians with timely, accurate professional advice in the best interests of those clients.

Labor will work with industry for solutions to these issues. That's why, in part, even from opposition, we have written to the Treasurer to demand that he review ASIC's industry funding model. It's why we've called for a greater recognition of specialisations and experience in the educational and exam standards for the many callings across the financial advice industry. These are issues that must be dealt with, and Labor is committed to dealing with them. But the question of how to fix the government's failures is only half of the equation. The other half of the equation is what this country needs to ensure that Australians can get the financial advice that they need. There's never been a more important time for Australians to have access to good financial advice. The pandemic has led to the restructuring of business and household finances and it's caused retirees and those planning for retirement to rethink their financial strategies.

Thanks to our universal superannuation system, which has come so much under attack from members of the coalition government over the last two years, Australians are now retiring with more money than ever—more money than at any time in our nation's history. It's extraordinary that, over 40 years, we've enabled a system which today has the average Australian male retiring with about $180,000 and the average Australian female retiring with about $118,000 in superannuation savings. The gap is too big, but it is worth pausing for a moment and saying that it is an extraordinary achievement. We are now retiring with more money than at any time in our nation's history. The system is working. Superannuation already contributes significantly more to retirement incomes than the Australian government does through the pension system—about $120 billion in the last financial year, as compared to between $60 billion and $80 billion from the Commonwealth in pension and related payments.

Superannuation is already doing its job, and we're retiring with more money, but never has it been more difficult for Australians to get financial advice of the type they need, scaled to and appropriate to their circumstances, so that they can make those critical decisions and make that money work in retirement, work for them and work for all of us to ensure that they are more self-reliant in their retirement. It's why we need to ensure that we fix this problem.

We know that the old model is broken—the old model that I alluded to at the beginning of this contribution, which was built essentially on a sales force. Insurance salespeople were selling products dressed up as advice and earning a commission on the basis of that. That model is broken, and we're never going back to that, but that does not mean that Australians don't need access to quality financial advice. They absolutely do. We need to ensure that we design a system which is viable for the advisers, that we have the right financial and professional standards in place and that there is a strong disciplinary body to weed out those who aren't adhering to the rules but let the rest of the industry get on and provide Australians with what they need.

The Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Bill 2021 takes a small step—a very small step—in the direction of resolving some of those issues by doing no more than implementing the long-overdue recommendation of the Hayne royal commission and abolishing the government experiment, which has been an abject failure, delivered by the pen of the current Prime Minister when he was Treasurer of Australia and, like so much of what this Prime Minister does, all announcement and no follow-through. I commend the bill and the second reading amendment moved by the member for Fenner to the House.

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