Bill Shorten (Maribyrnong, Australian Labor Party, Minister for Financial Services and Superannuation) Share this | Link to this | Hansard source

by leave—I present a supplementary explanatory memorandum to the bill and I move government amendments (1) to (17) on sheet BG223 and (1) on sheet ZA284 together.

(1) Schedule 1, item 10, page 6 (lines 23 and 24), omit "a period of 12 months or more", substitute "a period of more than 12 months".

(2) Schedule 1, item 10, page 6 (lines 32 and 33), omit "a period of 12 months or more", substitute "a period of more than 12 months".

(3) Schedule 1, item 10, page 9 (line 33), omit "within a period of 30 days", substitute "before the end of a period of 30 days".

(4) Schedule 1, item 10, page 10 (lines 6 to 8), omit subsection 962H(1), substitute:

(1) A fee disclosure statement, in relation to an ongoing fee arrangement, is a statement in writing that:

  (a) includes the information required under this section; and

  (b) relates to:

     (i) a period of 12 months (the previous year) that ends on a day that is no more than 30 days before that on which the statement is given; and

     (ii) any other period prescribed by the regulations.

(5) Schedule 1, item 10, page 10 (lines 13 and 14), omit "the 12 months immediately preceding the disclosure day", substitute "the previous year".

(6) Schedule 1, item 10, page 10 (lines 16 to 20), omit paragraph 962H(2)(b).

(7) Schedule 1, item 10, page 10 (line 21), omit "details of", substitute "information about".

(8) Schedule 1, item 10, page 10 (lines 23 and 24), omit "the 12 months immediately preceding the disclosure day", substitute "the previous year".

(9) Schedule 1, item 10, page 10 (line 25), omit "details of", substitute "information about".

(10) Schedule 1, item 10, page 10 (line 27), omit "the 12 months immediately preceding the disclosure day", substitute "the previous year".

(11) Schedule 1, item 10, page 10 (lines 28 to 30), omit paragraph 962H(2)(e).

(12) Schedule 1, item 10, page 10 (lines 31 to 35), omit paragraphs 962H(2)(f) and (g), substitute:

(f) information about any other prescribed matters, including information that relates to a period that begins after the previous year.

(13) Schedule 1, item 10, page 11 (lines 12 to 16), omit paragraph 962J(b), substitute:

(b) if a fee disclosure statement in relation to the arrangement has been given to the client since the arrangement was entered into—the anniversary of the day immediately after the end of the earliest period of 12 months to which the last fee disclosure statement given to the client related.

(14) Schedule 1, item 10, page 11 (line 19), omit "within a period of 30 days", substitute "before the end of a period of 30 days".

(15) Schedule 1, item 10, page 11 (line 20), omit "send", substitute "give".

(16) Schedule 1, item 10, page 13 (line 28), omit "A person", substitute "(1) Subject to subsection (2), a person".

(17) Schedule 1, item 10, page 14 (after line 11), at the end of section 965, add:

(2) Subsection (1) does not apply to a scheme to the extent that the operation of the subsection would result in an acquisition of property (within the meaning of paragraph 51(xxxi) of the Constitution) from a person otherwise than on just terms (within the meaning of that paragraph of the Constitution).

(1) Schedule 1, item 10, page 8 (after line 19), at the end of Subdivision A, add:

962CA Exemption from application of opt-in requirement

(1) ASIC may exempt a person, or a class of persons, from section 962K (the opt-in requirement), if ASIC is satisfied that the person is, or persons of that class are, bound by a code of conduct approved by ASIC for the purposes of this section.

(2) A code of conduct is approved by ASIC for the purposes of this section if:

  (a) the code of conduct is approved by ASIC under section 1101A; and

  (b) ASIC is satisfied that the code of conduct obviates the need for persons bound by the code to be bound by the opt-in requirement; and

  (c) ASIC is satisfied of any other matters prescribed by the regulations.

(3) The exemption must be in writing and ASIC must publish notice of it in the Gazette.

Today I move amendments to the Corporations Amendment (Future of Financial Advice) Bill 2011 to ensure that the key Future of Financial Advice reform measures work as intended. The amendments respond to recommendations of the Parliamentary Joint Committee on Corporations and Financial Services inquiry into the bills released on 29 February 2012.

Amendments (1) to (15) respond to a range of concerns by industry about the technical operation of the ongoing fee arrangement disclosure and renewal provisions. Amendments (1) to (5), (8), (10), (13) and (14) make technical changes to time frames around fee disclosure statements to ensure that the provisions can operate more in line with the current reporting periods of financial advice businesses and to make the various disclosure obligations more practical to discharge. Amendment (6) responds to concerns from industry about the practical difficulties of disclosing certain information about fees that have yet to be incurred. As a result, the amendment removes the requirement for a financial adviser to anticipate the amount their client will pay in the forthcoming year. Fee information for the year immediately passed will still be required.

Amendments (7) and (9) respond to concerns from industry that fee disclosure requirements might require more information than is practically necessary when disclosing details of services the client received or was entitled to receive in the previous 12 months. To make it clear that such disclosure need only be sufficient, rather than comprehensive, the amendments replace the words 'details of' with 'information about'. This will not diminish the client's practical understanding of the services they received or are entitled to receive from their adviser. Amendments (11) and (12) respond to the concerns from industry about the practical difficulties of disclosing certain information about services that have yet to be provided to the client. As a result, the amendments remove the requirement of a financial adviser to anticipate the services the client is entitled to receive or will receive in the forthcoming year. Information for the year immediately passed will still be required.

Amendment (15) is a technical change to ensure consistency of terminology in the opt-in provisions by replacing the word 'send' with the word 'give'. This also clarifies that an adviser does not have to send, for example, via mail the opt-in renewal notice to the client but can provide the notice in a number of alternative ways. Amendments (16) and (17) respond to concerns that the anti-avoidance provisions of the bill operate so broadly that they might acquire property on other than just terms. The amendment clarifies that the anti-avoidance provisions do not apply to the extent the operation of the subsection would result in an unjust acquisition of property within the meaning of paragraph 51 (xxxi) of the Constitution.

Returning to the other amendment about opt-in, the government is making some additional changes to the opt-in aspects of the FoFA bill to provide greater flexibility to industry while ensuring consumer protection is maintained. I am indebted in particular to the work of the member for Lyne in terms of the formulation of this amendment. The opt-in obligation requires financial advisers to renew their client's agreement to ongoing fees every two years. While this is an important protection to ensure clients do not pay open-ended ongoing fees while receiving little or no service, some parts of industry have argued this requirement is unnecessary where advisers are members of professional bodies or professional codes which obviate the need for opt-in; for example, if a code requires advisers to provide an ongoing service to clients if they charge an ongoing fee.

Peter Slipper (Speaker) Share this | Link to this | Hansard source

I ask the minister to pause. The honourable member for Flinders should remove himself from the chamber as he is inappropriately attired. He can come back when he is appropriately attired.

The member for Flinders then left the chamber .

Bill Shorten (Maribyrnong, Australian Labor Party, Minister for Financial Services and Superannuation) Share this | Link to this | Hansard source

The amendment gives ASIC the ability to exempt advisers from the opt-in obligation if they are satisfied that the adviser has signed up to a professional code which obviates the need for opt-in. This is a sensible change—which has also been recommended to me by a range of industry participants, along with the member for Lyne—which makes advisers who deliberately put in place set-and-forget arrangements accountable to the opt-in obligations in the law but provides some commonsense relief for those advisers that act in a professional manner and are obligated under a code to adequately service clients. This is not a loophole to opt-in, and let me be clear on this. If ASIC is not satisfied that a professional code obviates the need for opt-in, those advisers signed up to that code will need to comply with opt-in requirements. This also provides an incentive for advisers to attain a greater level of professionalism, something that can only be good for the sector and ultimately the consumers. This ensures consumers are adequately protected either by a professional body or, failing that, the opt-in provisions in the law.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

To expedite the debate, I want to be perfectly clear about the coalition's position. In relation to amendments (1) and (2), we will not oppose those amendments, where it is specifically about a period of 12 months or more. In relation to amendment (3), which is a slight change in the wording of 30-day period for the annual fee disclosure statement, we will support that. Amendments (4), (5), (8) and (10) in relation to the period to which a fee disclosure statement relates we will support. Amendments (6), (7) and (9), an argument about easier compliance by industry with the information required to be provided in fee disclosure statements, we will support.

Amendment (11), which removes paragraph 962H(2)(e), we will support. We will also support amendment (12), which removes paragraphs 962H(2)(f) and (g) the same way as our amendment (13) does to the extent that it is a catch-all regulation making the clause slightly wider than the existing clause. We will support improved wording on disclosure day in amendment (13).

We are opposing amendment (14), which changes the wording in section 962K, the opt-in clause, because we do not agree with opt in. The minister has clearly stated today that opt-in still exists—red tape. Amendment (15) changes the wording in section 962K opt-in clause to make it consistent. Similarly we oppose that. On amendments (16) and (17), our amendments are clearly better. This changes the anti-avoidance provision in the bill to potentially exempt arrangements in existence before the commencement of the bill from the anti-avoidance provisions but the way the amendment is drafted unquestionably creates uncertainty and leaves it to the courts to decide what is permitted and what is not permitted.

We are, without qualification, strongly opposed to the government's amendment to opt-in because we get rid of it. This is the key amendment, as identified by the minister, on ZA284: ASIC may exempt a person or class of persons from section 962K. This is going to kill small businesses. Have no doubt about it: this is going to have a very significant impact on small businesses. We have had the Independents talk about transparency, we had the government talk about letting the light in. How was this negotiated? Maybe the member for Lyne, who is given credit for this, can explain to the Australian people and the parliament how this was negotiated. It does not remove opt-in from the bill. It does not sort out the problems with the best interest duty. It does not provide certainty around the provision of scaled advice. It does not legislate the one-year extension for the implementation of FoFA that the government has promised. It does not fix a whole lot of outstanding issues with FoFA. But, specifically, this is going to increase unnecessary red tape.

Red tape is the bane of the life of small business. Red tape is what makes it so hard to undertake small business. Yet, here we have the minister negotiating exclusively with the member for New England and the member for Lyne a deal to keep opt-in in place, which is going to pile the red tape on. They could say, 'It is a class of people that will be subject to a code of conduct.' What code of conduct? A code of conduct has to go to the ACCC. A code of conduct has to engage all the businesses. Businesses all of a sudden have to have these new codes of conduct that they have to comply with. If it is a mandatory code, of course the ACCC needs to approve it. Then, 'If we haven't worked with one regulator, let's go to another regulator.' ASIC needs to approve it. This is small business. This could be a single financial planner in a country town who needs to comply with a new code of conduct for his industry, and that has to go to the ACCC, and that will take months and months to negotiate. It will take months and months to negotiate a new code of conduct for a particular class of advisers. (Time expired)

Robert Oakeshott (Lyne, Independent) Share this | Link to this | Hansard source

I will be brief as well. I am very aware of all members' time. I am really only speaking on government amendment (1), the insertion of proposed clause 962CA, 'Exemption from application of opt-in requirement'. The key word is 'exemption'. This has been a long and protracted negotiation. What we have now done, through negotiation, is achieve a path of choice for those in small business and those in both the financial planning and the financial advice market.

By 2015 there will be a very simple choice for anyone who is providing financial advice or financial planning services to clients who are mostly looking for security with their retirement savings. But this covers the full range of financial products. That choice for financial planners and financial advisers is either to participate in the opt-in process or to participate in accreditation under an industry code of practice. That will be developed over the next three years under ASIC rules, with full consultation with the industry. Clearly, as the amendment suggests, there is an exemption from the opt-in requirement.

The previous speaker, the member for North Sydney, was correct: there was and is a great deal of concern around the opt-in provisions. For over a year I personally have—and I know other members of this chamber have—been raising those concerns about the dead hand of government regulation in requiring a financial planner or a financial adviser to round up their clients every couple of years and re-sign them to their books.

Regarding other changes coming through in this FoFA legislation, importantly for me the keys are the fiduciary duty of the best interest test and really making the focus client-first. There are still some minor issues in that regard that we will all watch closely. But fundamentally that best interest rule is long overdue for making sure that financial advisers and planners do put their clients interests' first.

The second aspect of importance is the annual full fee disclosure. Again, while there are some issues there, where I personally would have liked to have seen stronger disclosure requirements, such as prospective disclosure—basically a quote for work for the coming year—I am happy to accept some negotiations around that to make sure there is an alternative pathway to the dead hand of government in and around opt-in. An industry code of practice in most professions is a bit of a no-brainer. If this is about cultural change and making sure we professionalise financial planning and financial advice and ensure clients' money gets the best service possible, then it may surprise many in this chamber that an industry code of practice is not already in place.

As an alternative to the opt-in path I think a code of practice is a sensible cultural move. It will encourage greater professional standards. It does so in a way that engages various planners, providers and their organisations and it does allow for a choice, in a voluntary way, to participate in the market under the code of practice. If that is all too hard and for some reason that does not work for you, then quite rightly there are opt-in provisions to make sure you participate in the cultural change and the professionalisation, making sure that we have financial products and financial advice delivered to the standard that I hope this House expects.

I appreciate the negotiations. They have been long and protracted, with all the various groups. I appreciate the minister and his office accepting and working on this amendment. It does now provide choice within financial markets and I think it is a sensible choice. (Time expired)

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Given that the member for Lyne said he had negotiated this and he is responsible for this initiative, can he tell me whether the Financial Planning Association Code of Professional Practice will satisfy ASIC?

Peter Slipper (Speaker) Share this | Link to this | Hansard source

The question is that the amendments be agreed to.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

If there is no answer, I'll ask him a further series of questions.

Peter Slipper (Speaker) Share this | Link to this | Hansard source

No. What happened was that the member for North Sydney sat down. If he wants to seek the call he is perfectly entitled to. On a separate call, the honourable member for North Sydney is given the call.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

I suspect that the member for Lyne did not negotiate in good faith. I expect that he simply, as he does on so many things, negotiated as effectively a Labor Independent, because we do not know what the purpose is of this ASIC exemption from the application of the opt-in requirement. The minister has insisted throughout the FoFA process that opt-in is a critical requirement. What has occurred to make the minister change his mind to provide an exemption? What is the information? What is the evidence? Where is the convincing argument? The financial planners already have a code of practice. What about the others? Are they going to satisfy an ASIC test? How is ASIC going to—

Peter Slipper (Speaker) Share this | Link to this | Hansard source

The honourable member for North Sydney should address his remarks through the chair.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

How is ASIC, Mr Speaker, going to determine whether a code of practice is acceptable or not? Is it going to be a code of conduct? Is it going to be a voluntary code of conduct that needs to be signed off by the ACCC, or is it going to be a mandatory code of conduct that again needs to go through the ACCC? What are going to be the requirements for people who have to comply with the code of conduct?

Effectively what you will have is two sets of laws. You will have the code of practice or the code of conduct that now the member for Lyne takes great pride in imposing on the entire financial services industry, and then you are going to have the laws themselves. If the code of conduct is accepted by ASIC then all those industries that are out there are going to have to change their software, change their application forms, change their processes and go through the education and training. What do they do all of a sudden? Do they stop? Because opt-in is meant to start.

When does opt-in start—1 July 2013; is that right? Or 1 July 2012? When does opt-in actually start? And, if it starts on 1 July 2014, how are people meant to go about getting their codes approved by ASIC and potentially the ACCC in the process and set up compliance mechanisms for the codes prior to getting that approved by ASIC? And, when it is approved by ASIC, does that mean they do not have to go with opt-in at all? Under this sham arrangement, it may well be the case, but it means that they have the red tape of compliance all the way. For a single financial planner in a country town, they have just been knifed by the Labor Independent member for Lyne and the Labor Independent member for New England.

Is it not correct to say that vast numbers of groups in the financial services sector were not even consulted about this amendment? The minister can tell us which major groups were involved in negotiation on this. When is it anticipated that ASIC will actually make the class order exemption? Will the exemption be made before or after the commencement date of FoFA? Is it likely that the industry will need to implement, as I said, significant and costly changes to be opt-in and then to be opt-out afterwards? Has there been any cost-benefit analysis of this additional red tape for the industry?

We do know that ASIC is going to approve, or not approve, the code of conduct, but what form will the code of conduct take? There are no explanations there either. What we have got out of all this is that the government is just loading more red tape on individuals and more red tape on financial planners and financial advisers. How will consumers be able to determine whether their financial adviser is subject to opt-in or not subject to opt-in? How will that be disclosed to a customer? How will the exemption operate in practice? If someone agrees to contract to the financial adviser at a time when the financial adviser is subject to opt-in, will the opt-in arrangements continue to apply if at a later date the financial adviser becomes exempt from the requirements?

Is the code of conduct likely to be determined by some other non-government body? If so, which non-government body? Will ASIC be able to approve more than one code of conduct in relation to the exemption for individual players? Will the code of conduct mandate or impose any continuing professional education requirements?

These are questions that are not answered. All we have had is a shonky deal between two Labor Independents and the Labor Party to get opt-in through. And the member for Lyne is going to go back to his electorate and he is going to say to them, 'Don't worry, guys; I defended your interests,' and not tell them the fact that they are going to be burdened with a vast amount of new red tape thanks to the government and the Labor Independents.

Paul Fletcher (Bradfield, Liberal Party) Share this | Link to this | Hansard source

The question of opt-in has been one of the most contentious in the approach to the Future of Financial Advice for the whole period that this package of reforms has been under consideration by the government and by the parliament. Financial advisers all around Australia have been anxiously approaching their members of parliament, saying that this is a fundamental challenge to the way they conduct their business and it is also a fundamental restriction on the freedom of both financial planners and their clients to contract, because an extraordinary proposition is being put into the law here.

The extraordinary proposition is that, if you as a client want to go to an adviser and say, 'I wish to retain your services indefinitely; I wish to retain your services until such time as I no longer wish to retain your services,' you are now prevented from doing that by law because of the opt-in requirement. It is now a requirement in the law, subject only to the amendment the sketchy details of which have just been provided to the House, that you may not contract without limit even if you, as a citizen seeking advice, believe that you are perfectly within your rights and capability to do so. So there are very good reasons why both the financial advisory industry and people seeking financial advice have been very concerned about opt-in.

We are now told at very late notice that a deal has been done between the government and the member for Lyne which sorts it out. It sorts it out, no problem—no problem at all!

It may still be the case that as a matter of black letter law the statutes of this country will say: 'You are not free to contract with your financial adviser for more than two years. But don't worry, there'll be a code of conduct which will sort it out.' What details do we have about this code of conduct? They have not been provided to the House. In fact, as a matter of law we are simply being asked to take it on trust from the government that the government will cause ASIC to approve a code of conduct which will allow these arrangements to proceed and that it will grant relief. Mr Speaker, I put it to you that that is a deeply unsatisfactory way in which to proceed. We are not being given the detailed information that this House has a right to expect if it is to give consideration to the substance of this deal, which we are told addresses this problem. And I think the minister ought to give a much more comprehensive explanation of what is proposed than he has done so far.

Bill Shorten (Maribyrnong, Australian Labor Party, Minister for Financial Services and Superannuation) Share this | Link to this | Hansard source

I thank the member for Bradfield for his invitation. First things first: I have just listened to an unsubstantiated attack on the member for Lyne. I make it very clear that in relation to amendment ZA284—that is, opt-in or a code of conduct—the only reason this government has diverged from just demanding opt-in compulsorily, full stop, is because of the member for Lyne, because of the Financial Planning Association of Australia and because of the application. He has stood up for financial planners and he has made a cogent case.

Opposition Members:

Opposition members interjecting—

Bill Shorten (Maribyrnong, Australian Labor Party, Minister for Financial Services and Superannuation) Share this | Link to this | Hansard source

I actually wish that those opposite would sometimes sit down and engage in constructive discussion with us and stop leaving the heavy lifting of compromise, negotiation and conciliation to the cross-benchers. It is interesting—and I do reflect that I listened very carefully to what the shadow Treasurer had to say—that, of the other set of government amendments numbered (1) to (17), we are in agreement on the first 13, which is good. This does show that sometimes we can reach the same conclusion, which is positive.

In terms of some of the questions that were raised, I want to go to some of the bigger picture points and then perhaps address some of the more specific issues which were raised in order to be of assistance, because I thought there were some legitimate questions. Firstly, the FoFA opt-in arrangement does provide certainty. The system which triggers opt-in will commence on 1 July 2013. But advisers have a choice: opt-in or an industry code. The consumer will have the certainty that they will be protected by opt-in or an ASIC approved industry code. Indeed, I wish that perhaps earlier governments had stamped out some of the problems with commissions when they were in power, instead of leaving it to the current government to do it.

There was also a reference to best interest duty, exposing advisers and having no legal certainty. It is true that in the financial services industry some stakeholders want a tick-a-box approach to the provision of advice. I do not believe this is what the consumers want. I do not believe that this is what many financial planners want. Nor do I believe that it is consistent with government policy. A tick-a-box approach is not what will change the culture of financial planning. I have said time and time again that I believe the vast majority of financial planners do an excellent job, but anyone who says that there have not been problems in terms of financial services in this country in recent years must have their head in the sand and certainly have not met some of the victims of Storm, Opes Prime or indeed, more recently, Trio. Our amendments provide more certainty with the provision of scaled advice, including protection around the full fact find. This is not enough for some in the industry but, at some point, I believe that one has to stop quibbling about the words and just simply embrace change.

There is an argument being run that somehow improving confidence in the financial planning system will undermine the job security of thousands of people in the financial planning industry. Well, welcome to nine to 12 per cent superannuation. It is this government who has increased compulsory superannuation from nine to 12 per cent this week, and it will be implemented over the next seven years. We are enlarging the opportunity for the wealth management industry in this country. We are not shrinking it; we are enlarging it.

There were some specific questions raised by those opposite, which I might just go to in order to provide some persuasive clarity, which might indeed engage them in a road to Damascus conversion on some of the amendments. In terms of the ASIC exemption from the application of opt-in, we believe that consumers are provided with certainty, that a code obviates the need for opt-in. Some say that we should have just stuck with opt-in solely. We believe that the ASIC code will allow a choice for consumers and for planners.

In terms of why we believe that opt-in is important—and we could accept the propositions put by many in the financial planning industry and consumer groups—is that we believe that we should provide flexibility—

Mr Briggs interjecting—

Peter Slipper (Speaker) Share this | Link to this | Hansard source

The honourable member for Mayo will not interject from outside his seat.

Bill Shorten (Maribyrnong, Australian Labor Party, Minister for Financial Services and Superannuation) Share this | Link to this | Hansard source

We did listen to people in the industry. That is why we have tried to provide this alternative to opt-in. In terms of our consultation—and the issue of who had been consulted was raised—in the last year and a bit, we have met with all of the groups on a consistent basis, with individual companies and planners. I have also met with some of the victims of unfortunate financial planning operations. We believe that ASIC is the right organisation to work the code. (Extension of time granted) We believe that ASIC is capable of working through with the industry stakeholders and consumers to develop this code. We have committed to providing the resolution about the code before 1 July 2015. So we do believe that there is plenty of time for ASIC to do the work that is required. We believe that it is the industry who has to be consulted in developing that code. We believe that this will provide an enhancement to the provision of financial advice in this country.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Minister, can you give us an assurance that there will not be just one code?

Mr Shorten interjecting—

Come on, mate! There was a negotiation—

Peter Slipper (Speaker) Share this | Link to this | Hansard source

The shadow minister will address his remarks through the chair.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

There was a negotiation with the Financial Planning Association. They had a code of practice. I want to know on behalf of all the other industries that that is not going to be the only acceptable code. And it is very important because—

Bill Shorten (Maribyrnong, Australian Labor Party, Minister for Financial Services and Superannuation) Share this | Link to this | Hansard source

Yes, I can give the undertaking sought by the member for North Sydney.

Peter Slipper (Speaker) Share this | Link to this | Hansard source

The question before the chair is that the amendments be agreed to.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

by leave—I move opposition amendments (1) to (8) and (15) to (21) together:

(1) Clause 2, page 2 (table item 2), omit the item, substitute:

(2) Schedule 1, item 10, page 5 (line 14), omit the definition of renewal notice.

(3) Schedule 1, item 10, page 5 (line 15), omit the definition of renewal notice day.

(4) Schedule 1, item 10, page 5 (line 16), omit the definition of renewal period.

(5) Schedule 1, item 10, page 8 (line 20), omit "Termination, disclosure and renewal", substitute "Termination and disclosure".

(6) Schedule 1, item 10, page 9 (line 17), omit "or section 962K (the renewal notice obligation)".

(7) Schedule 1, item 10, page 9 (lines 23 and 24), omit "or section 962K".

(8) Schedule 1, item 10, page 9 (line 26), omit "or section 962K".

(15) Schedule 1, item 10, page 11 (line 17) to page 12 (line 29), omit sections 962K to 962N.

(16) Schedule 1, item 10, page 13 (lines 13 to 25), omit Subdivision C.

(17) Schedule 1, item 10, page 13 (line 28), before "A person", insert "(1)".

(18) Schedule 1, item 10, page 14 (after line 11), at the end of section 965, add:

(2) Subsection (1) does not apply in relation to a scheme if any part of the scheme was entered into, begun to be carried out, or carried out before the day on which this Part commences.

(19) Schedule 1, item 11, page 14 (lines 16 and 17), omit paragraph (jaad).

(20) Schedule 1, item 12, page 14 (lines 29 and 30), omit subparagraph (1E)(b)(ii).

(21) Schedule 1, item 12, page 14 (line 34), omit "or (ii)".

Amendment (1) ensures that the commencement date of FoFA will be delayed until 1 July 2013, consistent with the proposed start date of the MySuper changes. The current implementation date of 1 July 2012 is plainly ridiculous. It is plainly ridiculous to start it in four months. It has not even gone through the Senate yet. Given FoFA and MySuper involve major changes for the same financial services providers, it would make sense to implement them simultaneously. It is symptomatic of the government's chaotic approach to this area and its lack of understanding of practical business realities that it seeks to impose two different implementation dates involving significant and costly system changes in very quick succession. The minister has informally flagged for some time now that he will agree to a delay of the implementation. Well, he can take this amendment. It is time that he formalises it and gives certainty to the industry. The government should be supporting this amendment.

In relation to amendments (2), (3), (4), (5), (6), (7), (8) and (15), these amendments remove the opt-in provisions from the legislation. Opt-in provisions impose a mandatory requirement on consumers to re-sign contracts with their financial advisers every two years. It was not part of the original Ripoll inquiry recommendations. Where is he? Where is the member for Oxley? There he is. Sorry, I overlooked him—just like the Prime Minister has on a couple of occasions. Out of 407 submissions to the original Ripoll inquiry, only one—the submission from the government's friends in the Industry Super Network—called for the introduction of opt-in provisions. Opt-in provisions impose a significant and unnecessary increase in red tape and costs on both small business financial advisers and consumers. Of course, the member for Lyne does not care about that and nor does the 'member for Tamworth'. They love that red tape for small business and they are going to be party to it.

The government has been unable to point to another example anywhere in the world where a government has sought to impose a mandatory requirement for consumers to re-sign contracts with their financial advisers on a regular basis. As such, by pressing ahead with opt-in provisions at the behest of his friends in the union dominated industry super fund movement, it would appear that the minister is intent on making Australia a world leader in red tape. With the best interests duty in place, appropriate transparency for fees charged and the ongoing capacity for clients of financial advisers to opt out of any advice relationship at any stage, there is adequate consumer protection without the need to impose additional costs and red tape on both businesses and consumers.

My amendments (16), (19), (20) and (21), consistent with the government's approach in its exposure draft released in August last year, ensure that the annual fee disclosure requirements will apply prospectively only and will not apply retrospectively. The Ripoll inquiry made no recommendation to introduce an additional annual fee disclosure statement over and above the current regular statements provided by the financial service product providers to their clients. To impose these additional annual fee disclosure requirements retrospectively to all existing as well as new clients increases costs for no or only little additional consumer protection. Those additional costs will ultimately have to do be borne by the consumer and are obviously not proportionate to any questionable additional protection benefit.

In the FoFA consultation sessions, it was the industry's clear understanding that the government's proposal to impose an additional annual fee disclosure statement be prospective only. That is, it would apply to only new clients and not existing clients. That was also the position advanced by the government in its exposure draft of this legislation released only two or so months earlier. The Financial Services Council estimates that implementation of the fee disclosure requirement will cost approximately $54 per client prospectively—that is for new clients—and $98 per client retrospectively for existing clients. So this is yet another example of the very poor and deeply flawed consultation process engaged in by the government in relation to this. Finally, my proposed amendments (17) and (18) ensure that the antiavoidance provision in the legislation applies prospectively only and does not unintentionally apply the antiavoidance provision retrospectively. The existing provision was introduced with little or no consultation. The coalition amendments correct the issues relating to grandfathering and will ensure that the provisions apply prospectively to avoid any unintended consequences to retrospective— (Time expired)

Peter Slipper (Speaker) Share this | Link to this | Hansard source

The question is that the amendments be agreed to. I call the honourable the minister but before he speaks the honourable member who is obscured by the member he is talking to—I believe it is the honourable member for Hughes—is inappropriately attired. He will leave the chamber.

The member for Hughes then left the chamber.

Bill Shorten (Maribyrnong, Australian Labor Party, Minister for Financial Services and Superannuation) Share this | Link to this | Hansard source

I thank the shadow Treasurer for his remarks. The reason the government is not supporting the opposition amendments in their current form is that we believe they would weaken the reforms we are trying to introduce. I will state again that we see the 'drop dead' date for implementation of FoFA being 1 July 2013 but we do believe that putting in the date of 1 July 2012 encourages early movers to take advantage of these reforms.

Peter Slipper (Speaker) Share this | Link to this | Hansard source

The question is that the amendments moved by the honourable member for North Sydney be agreed to.

Peter Slipper (Speaker) Share this | Link to this | Hansard source

The question before the chair is that this bill, as amended, be agreed to.