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

I move:

That this bill be now read a second time.

This bill is designed to improve and streamline the financial planning process. We have seen over the past 16 years a massive increase in red tape and regulation in this sector resulting in advice being too expensive, too hard to access and strangled by red tape. We have seen the unmet advice need continue to grow across our economy because people simply cannot afford financial advice. We have seen advisers close their books because they are flat out managing their existing client base because of the regulatory impost and are no longer able to take new clients.

The purpose of this bill is to streamline the engagement process between the financial adviser and client and it does this in two ways. First, it creates the requirement to provide a clear and concise letter of engagement which will be provided to a client prior to receiving any financial advice. This letter confirms the clear and transparent agreement between the adviser and the client that clearly outlines the scope of advice to be provided. Secondly, this bill removes the requirement for the provision of a statement of advice. The reason this is important is these are currently 100-page documents that nobody reads—that nobody reads.

The important bit in all of this is: what is the advice that is being provided and how does that relate to the scope of advice being sought? That is why in this bill we replace the statement of advice with what is called a record of advice. The term 'record of advice' and use is already well understood across the industry and is an existing provision within the Corporations Act. These changes are meant to ensure the client will be provided with the advice they seek in a way that is clear, concise and easy to understand. More importantly, in simplifying this process, it is expected to reduce the cost and time taken to produce statements of advice, in that they are being replaced by these records of advice. This new process differs from the existing obligations to provide the statement of advice for some clients but not all. In this process it will be required for all clients for any scope of advice sought. In part, the recommendations of the Levy review touched on this and this was, in part, the basis for these changes. Also, the government has failed to do anything in a space over the last two years despite talking a good game.

In her review, Michelle Levy referred to getting rid of statements of advice altogether. I am not of the view the statement of advice should be removed altogether because I think the agreement between the adviser and the client should be in written form. I don't believe that having a verbal understanding or agreement in this space, given the complexity of some of the work that is done for clients, is a good outcome for either the client or adviser.

These changes also ensure that the advice provided to the client is directly relevant to the scope of advice sought. This provides a clear link to demonstrate that the adviser has listened to the client's needs and concerns with regard to the advice being sought, and then that can be clearly demonstrated as being delivered by the record of advice. The adviser will still need to retain in their files all the relevant working papers and notes et cetera. That is a given. But it is the importance of the documentation that is provided to the client that is simple, concise and clear and demonstrates that the advice being provided is relevant to what is sought.

I'll give this simple example: a 23-year-old tradie who's coming in and wants an income protection policy. Why should they have to go through a whole process that results in a 100-page document that is going to cost several thousand dollars in costs because of the complexity when all they need is some straightforward advice on an income protection policy that is suitable to their situation at that point in time? Why can that not be provided through a letter of engagement which clearly states the scope and then a record of advice which clearly shows why that policy that is being recommended is suitable to their needs? It shouldn't be any more difficult than that.

And that is the whole intention of this bill. Yes, he might become a longer term client, where you talk about superannuation and a whole range of other issues, but at that point in time that is the piece of advice that he needs, and that is exactly what this bill is trying to achieve—simplify the process, reduce the paperwork and ensure there is something that is relevant to the client that they're going to read and understand. But, at the same time, it makes clear the adviser's obligations to ensure that the advice that they provide is directly relevant to the scope of advice agreed to in the letter of engagement. That is what we are trying to get to with this bill. I am going to hand my remaining time to the shadow assistant minister for financial services.

Mike Freelander (Macarthur, Australian Labor Party) Share this | Link to this | Hansard source

Is the motion seconded?

Luke Howarth (Petrie, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I second the motion and rise to speak on the member for Forde's private member's bill, the Corporations Amendment (Streamlining Advice Process) Bill 2024. I commend the member for Forde, who's got a lot of experience in this industry, for this bill, which is an important step towards reducing red tape for financial advisers and Australians that need the advice. The Albanese Labor government's inaction on financial advice reforms is leaving Australians underadvised and underinsured.

It's been 689 days since Michelle Levy handed down to the Albanese government her quality-of-advice review's final report—689 days! The government has failed advisers by leaving the implementation of the review's most important red-tape-reducing recommendations to the very last minute, including the recommendation to remove statements of advice. Action on reforming the burdensome statement of advice process is long overdue, and these reforms will significantly reduce the time and cost of providing advice.

The Levy review found on average that it can take up to 14 hours to produce a statement of advice. In the middle of a cost-of-living crisis under the Albanese government, where 12 interest rate rises have sent rents through the roof and people's mortgages through the roof at the same time that immigration has ramped up and homelessness is on the rise, people can't get advice, because the statement of advice—the red tape and regulation that's been put in place in this House—takes up to 14 hours to do. For a financial adviser that has a firm with a secretary and staff and everything else—rent, wages, super and all the rest of it—you can be paying $200 to $300 an hour. At $250 an hour times 14, you're up for $3,500 just to get a statement of advice.

The member for Forde was spot on when he spoke about the tradie that needs some financial advice. The bill that the member for Forde has put forward can cut that advice by perhaps up to 12 hours. So all of a sudden, you have a bill that goes down from $3½ thousand to $500. That's smart work from the member for Forde. That's what we should be doing in this House. Every minister in this government should be thinking daily: 'How do we reduce regulation? How do we reduce red tape?' Right now Australians and small businesses are heaving under the weight of the regulation in this place, and the Albanese government needs to cut red tape. We know the FAAA and other associations, such as the Financial Services Council, are behind reducing red tape.

Mike Freelander (Macarthur, Australian Labor Party) Share this | Link to this | Hansard source

Order! The time allotted for this debate has expired. The debate is adjourned, and the resumption of the debate will be made an order of the day for the next sitting.