Helen Kroger (Victoria, Liberal Party) Share this | Hansard source

I rise to join my colleagues in voicing their concerns about the inadequacies of this legislation, the Corporations Amendment (Future of Financial Advice) Bill 2012. The coalition appreciates that the financial services and advice industry plays a vital role and that in fact many Australians, many families and indeed many small businesses rely on this industry to help them realise their individual aspirations. They rely on this industry to help them look after their financial health and wellbeing.

Financial advisers, dare I say, are integral to assisting and guiding people to avoid pitfalls and to maximising financial opportunity. I know as a former small business owner how helpful this advice can be at times—when you need a second opinion or guidance through the paperwork. Most small business owners and operators do not have the time to do the due diligence and they do not have the time to do the necessary research to look at various options and what is in their fiduciary best interests. Their focus is on keeping the doors open and on supporting the staff and the families that work for them. This industry is of particular import to them.

The financial services reforms legislated in 2001 put in place a solid regulatory foundation for our financial services industry. Of that there can be little doubt. Financial services providers deal with other people's money, making it vital that a robust regulatory framework is in place. The coalition appreciates this and it is why we made those financial services reforms in 2001. We will always support legislation that improves regulation, that makes the industry more simple and cost effective for everyone. The government's legislation in its current form, however, does not achieve that. Our role in this place is to enact legislation that will improve the lives of those that we represent. We are not here to provide more hurdles or to introduce further layers of bureaucracy and more red tape. We are here to cut the red tape and regulatory overreach that hinders Australians in their everyday aspirations, including financial aspirations. We are here to help Australia's financial services industry to achieve a balance between providing consumer protection and providing access to high quality financial services. This government's legislation, in its current form, does not achieve that either.

As colleagues have already outlined, the coalition cannot support this legislation without a series of significant amendments. But this did not have to be the case. Indeed, if the government had accepted the reasonable reform recommendations advised by the Parliamentary Joint Committee on Corporations and Financial Services, then it would have been a very different story here today. Instead, Australians will be weighed down by yet another piece of legislation that yet again makes life more expensive and more complicated. The government should be helping to develop an industry that supports citizens to realise their financial goals, rather than blocking them. But this government have never understood that. Every day since they have been in government, they have made it more difficult and tougher for the average Australian.

The global financial crisis made it clear, here and around the world, that policy makers need to take a closer look at this industry to see what can be done to protect against similar crises in the future. As we know, Australia did fare better than other nations, but financial service providers such as Storm Financial, Trio and Westpoint collapsed. We were all in agreement that a serious review was needed, which is why in February 2009 the parliament asked the Parliamentary Joint Committee on Corporations and Financial Services to conduct an inquiry. The inquiry, as we have heard, was tasked with undertaking a thorough examination of Australian financial products and services, which it did, reporting back nine months later in November 2009, after an exhaustive consultative and comprehensive process.

The recommendations that came out of that inquiry, the Ripoll inquiry, were considered and had the support of the coalition. As I said earlier, if the government had proceeded with legislation enacting those recommendations, there would have been bipartisan support and backing today. The inquiry's report observed that

… situations where investors lose their entire saving because of poor financial advice are more often a problem of enforcing existing regulations, rather than being due to regulatory inadequacy.

The report recommended the introduction of fiduciary duty for financial advisers that required them to place their clients' interests ahead of their own. We did not actually see a demand for more and more layers of red tape and bureaucracy here; rather, the better and more effective implementation of the regulations that currently exist.

That report and the recommendations were received, as I said earlier, by the government back in 2009. Yet here we are, some two years later and the legislation that we have before us does not reflect the recommendations of that report. It begs the question: why is it that we are dealing with this only days before 30 June. What we have before us in the Senate is yet another example of gross government incompetence. The government has let vested interests hijack its Future of Financial Advice package. We have witnessed two years of the government taking what could have been strong and effective legislation and slowly tearing it apart piece by piece. There has been a steady stream of unexpected and unnecessary changes to create the flawed legislation that we have before us today. Right up until the introduction of the legislation, the government was making changes, trashing the legislation and the corresponding improvements to the financial services industry that could have flowed from it. On this side of the Senate, we have watched, I have to say, with absolute dismay. We are completely baffled by the constant changes—changes carried out with no clear appreciation of their costs or their implications.

The legislation in its current form is not for Australians seeking financial advice. I say it is not for them because it will lead to increased costs and reduced choice for people who look to the financial services industry to assist them in reaching their financial goals—and, as we know, that is a lot of people. They are families, small businesses and individuals who are all working hard to build their assets and who are being asked by the government, yet again, to cough up more money and for less choice. This is of huge concern to us on this side of the chamber, particularly at a time when we know that Australians are under significant pressure from the high cost of living pressures that will only be exacerbated after the introduction of the carbon tax on 1 July.

If all this was not enough, it is predicted that increased unemployment will stem from the FoFA package. With this legislation, which is unnecessarily complex, the government is enshrining, yet again, an unlevel playing field among advice providers. It is favouring a government-friendly business model—hardly surprising, given the track record of those on the opposite side. Of course the government favours its friends, as we know. And the public have thrown up their hands in frustration at the government's special treatment of its union buddies. Yes, once again, we are not surprised. Are we disappointed? Absolutely, damn right, we are disappointed, but it is for us to demonstrate that this legislation is not only inappropriate but that the government should come clean and allow amendments to it to be passed. The government should amend the FoFA package rather than pushing ahead with its implementation, which, according to conservative industry estimates, will cost $700 million and an additional $350 million per annum to be complied with.

Although important financial advice reforms have been delayed by more than two years, the government wants to implement this costly legislation on 1 July. Even the government sees that it is a ridiculous time frame, so now we are left with a 'soft' start date on 1 July. It begs the question: what is the definition of—to put it in their words—a 'soft start'? A soft start sounds to me like a perfect recipe for causing huge confusion among both consumers and advisers. The government still expects people to implement some changes stemming from this legislation in just over a week. But how can the government seriously expect people to change their business practices within that time frame? More importantly, how are consumers supposed to know which adviser is complying with which rules, old or new? There will be a so-called 'hard' start date on 1 July 2013—next year. So we have two start dates. We have a soft start date and we have a hard start date. It sounds to me like the first date will be nothing but a false stall date.

The government would be better off conceding that all its delays and changes have made it impossible to stick to the unrealistic time frame of 1 July 2012. The government should be practical, logical and sensible about this. It should take the common sense approach and implement this legislation properly and appropriately in the next financial year but in an amended form. The sensible approach would be to accept the coalition's amendments and work towards a realistic start date in 12 months time. This would most certainly remove the fear and uncertainty associated with this legislation, giving consumers and financial advisers the breathing space to understand and better prepare for the implementation of the necessary changes. As we know, that would be the sensible approach, the common sense approach, but we know that it is not the way that this government goes. We know that, time after time, it has not been their course of action.

Regrettably, the government prefers a chaotic antibusiness approach. This is engrained in absolutely everything it does and in every policy decision it makes. Another example of the government's antibusiness approach is evidenced in its failure to conduct an appropriate regulatory impact assessment of these bills. When instigating regulatory changes, it is of paramount importance that a government thoroughly assess the resulting costs and red tape for both businesses and consumers. Not only is this assessment process of paramount importance but it is consistent with the government's own best practice regulation requirements.

The government's own Office of Best Practice Regulation found that the government had inadequate information to assess the impact of these FoFA bills on both businesses and consumers—which, I have to say, hardly inspires confidence. If the government does not understand how FoFA will impact on costs and red tape, how on earth are the financial services industry and its clients expected to? The fact that the government is creating uncertainty and unnecessary headaches for the financial service providers should ring a very loud bell. The government had the opportunity here—and, in fact, still has the opportunity—to improve this and take on board the coalition amendments.

These are the amendments recommended by the coalition members of the Parliamentary Joint Committee on Corporations and Financial Services, the most important amendments including a requirement by parliament that the government table a regulatory impact statement on FoFA, assessed as compliant by the government's Office of Best Practice Regulation. I cannot stress enough the importance of the government's legislation complying with its own best practice. Why have an Office of Best Practice Regulation if the government does not look to its expertise to carefully assess legislation such as this? It just flies in the face of all common sense; it is beyond belief. The implementation of this should be delayed. A delay would not just allow financial service providers and their clients the time needed for implementation but also provide a great deal of surety for consumers as well. A delay would mean that the major changes associated with FoFA would align with the major changes to MySuper. Both MySuper and FoFA require significant changes to the same financial service provider IT systems.

The government is also wrapping up the financial services industry in more red tape with its mandatory requirement that consumers re-sign contracts with their financial advisers on a regular basis. The requirement is not one of the initial inquiry recommendations, and the government cannot give even one example of another country that imposes such a requirement. No other country is being factored in that has done this and demonstrated that it is a good thing today. Yet again we are seeing this government proceed with something that no other nation has considered as an effective and better way to provide regulatory oversight.

The coalition is confident that the best-interests duty, fee transparency and the client's ability to opt out of advice at any stage give adequate protection to clients. We would completely remove the opt-in requirement if returned to government. The coalition would also, as some colleagues have expanded on, simplify and streamline the additional annual fee disclosure requirements and improve the best-interests duty.

The government has missed a real opportunity here to provide clear and effective reform. Sadly, those who work in financial services and their hardworking clients will suffer the most from the government's incompetence and lack of judgment.