Cory Bernardi (SA, Liberal Party, Shadow Parliamentary Secretary Assisting the Leader of the Opposition) Share this | Hansard source

I have been following this legislation—the Corporations Amendment (Future of Financial Advice) Bill 2012 and the Corporations Amendment (Further Future of Financial Advice Measures) Bill 2012—with interest, because I spent some years in the financial services industry and have indeed been a financial adviser. So I have a very acute understanding of the benefits of strategic financial advice for Australian consumers and of the importance of that. This is an issue that I think is not understood by far too many people—perhaps even in this place.

But in saying that I will also say that these bills seek to allay some fears or to put forward the notion that the government is actually doing something to protect consumers from themselves or from some sort of rogue. In my view the government clearly has failed to understand that the overwhelming majority of financial advisers do the right thing by their clients. Whilst it may seek to make changes it thinks will be in the interests of consumers, the glaring holes, the lack of response and the lack of consideration of the joint inquiry into financial services—the Ripoll inquiry, which has been referred to recently—plus the overwhelming addition of bureaucratic red tape is ultimately going to disadvantage consumers trying to get timely, affordable and independent financial advice.

The financial services industry has performed very well throughout a number of very trying times—the global financial crisis. Certainly I have to acknowledge that there have been some problems. We have had some schemes that have not worked well. We have had some financial service providers that have clearly done the wrong thing and made presumptions. There have been cases of illegality. There have been cases of fraud and deception. But we have ASIC, we have the corporations regime and we have various other licensing regimes to deal with these failings. If the government is looking to penalise an entire industry for the failings and the rogue actions of only a few, then it would appear that this legislation is going that way. I say it is the wrong approach to take. The Ripoll inquiry, which looked into this bill and made a number of very reasonable recommendations, was about providing a framework for legislative change, a framework the government could have adopted with bipartisan support. Common sense and bipartisan support are not, however, what this government is seeking. This government, in typical Labor fashion, has chosen not to follow the common-sense path and not to look for something that could be supported by both the major parties—and indeed some of the Independents, I am sure. Instead, it has chosen to make things harder, it has chosen to make things more complex and it has been influenced by vested interests.

In striving to improve legislation, we should not be looking to make things more complex; we should be trying to simplify them. Simplifying them not only enables consumers to more readily understand what they are being presented with but allows advisers to provide straightforward advice, knowing that it is compliant, in the best interests of the client, without the fear of having to create a paper trail that goes on forever. Increasing red tape when there are more sensible options on the table does nothing to improve the situation. The FoFA package of bills, as it currently stands, will adversely impact the financial services industry. It will increase costs, it will ultimately reduce choice for Australians, and a number of sections of the legislation will, as I said, increase red tape and make things much more complex for the industry.

There is an expectation within the industry that the FoFA package of bills will increase unemployment and put many financial advisers out of business. In a submission to the parliamentary committee, the managing director of AMP Financial Services, Craig Mellor, forecast that up to 25,000 jobs could be lost in the next few years. The Association of Financial Advisers also predicted job losses of around 30,000 and said:

… FOFA, as it stands, will decimate the financial advice profession.

These people are not merely being harbingers of doom; they are expressing genuine concerns. If we add those concerns to the conservative industry estimate that the cost of implementing these bills is around $700 million and that there are going to be another $350 million worth of compliance costs annually, you have to ask: who is going to benefit from this?

This legislation is going to put up industry costs, and ultimately that increase in costs is going to be passed on to the consumer. It is going to be prohibitive for many consumers to get appropriate advice before making what can be life-changing decisions. That is why the coalition is seeking to improve this legislation. It is not that we are opposed to it; we are just opposed to it in its current form because it is not in the consumers' interests, it is not in the advisers' interests and it is not in the national interest. We cannot support the bills in their current state. I say to the government and to the minister that, if you accept our amendments, we can significantly improve this legislation—which would then be worth supporting.

I remind members of the government of the words of the Minister for Finance and Deregulation, Senator Wong. Back in 2010, she spoke about the Office of Best Practice Regulation:

Well designed regulation is of critical importance to the Australian economy. Good regulation can encourage innovation and minimise compliance costs for business, including small business, and the not-for-profit sector. Poorly designed regulation, however, can cause frustration and impose unnecessary costs on all sectors of the community.

I agree with Senator Wong. It is one of the things we do agree on. Poorly designed regulation can increase compliance costs and cause frustration for members of the community. If Minister Wong and her colleagues truly believed these words, they would support our amendment which would require the government to table a regulatory impact statement on FoFA assessed as compliant by the Office of Best Practice Regulation. They will not do that. They will not live up to their own best practice regulation requirements, which are aimed at avoiding higher costs and avoiding red tape for business.

Why will they not do it? Because they are belligerent in their approach to legislation. They think they know best. They think the industry knows nothing, that the industry has no common sense. This attitude is apparent not just in this package of bills but in a whole raft of areas where this government has refused to listen to the wisdom of those who actually know what they are doing. I do not know how many on the other side of the chamber have worked in this industry. I do not know how many have actually worked in private enterprise at all, quite frankly. We cannot get to the bottom of that, but it may only be a handful of them. Have that handful had any input into this? I would suggest not.

I will summarise some of the many issues attached to these bills in the very brief time I have left. We have said that the package of bills is unnecessarily complex and that in many parts it is unclear. That has been made very clear by members of the industry themselves. As I have mentioned, it is expected to cause an increase in unemployment. We think the legislation actually enshrines an uneven playing field amongst financial advice providers—it inappropriately favours a government-friendly business model. If we took financial advice that was along the same lines as the approach this government takes to managing the nation's finances, this country and every individual within it would be on the way to going broke. The FoFA package of bills is going to increase costs—$700 million to implement it, then $350 million a year.

That is why we want to amend this legislation. We want the opt-in provision to be removed so that people do not have to go back and sign a new contract with their financial adviser every year—they can honour the commitments they have entered into knowing that this is going to be in their best interests. We want the drafting of the best-interests duty to be improved. We want the ban on commissions for risk insurance inside super to be further refined. We could go on and on.

Most importantly, we need to delay the implementation of these reforms until 2013 so that it can align with MySuper. We need to make sure the government's legislation reflects the concerns of the coalition—which are the longstanding concerns of the community and the industry—and implements our amendments. As has been said, the coalition members on the Parliamentary Joint Committee on Corporations and Financial Services agree with many of the recommendations made by the Ripoll inquiry. It is shameful that this government not only ignores a worthwhile inquiry by a joint committee of both houses of parliament but has ignored the recommendations of its own members.