Christopher Back (WA, Liberal Party) Share this | Hansard source

I appreciate the opportunity to comment on the Corporations Amendment (Future of Financial Advice) Bill 2012 and the Corporations Amendment (Further Future of Financial Advice Measures) Bill 2012, and make the obvious observation that the financial services sector is one that needs strong legislation, as was recognised back in 2000-01 by the Howard government, which provided a strong regulatory foundation for the sector. But over time there should be room for improvement and room for change. I, for one, at the commencement of this inquiry actually welcomed a process of review and upgrade, particularly in light of events that have occurred since 2001, including the downturn with the global financial crisis. In fact, when I started to closely study the FoFA advice that came through by way of this legislation I was greatly disappointed. Of course, it is no longer in draft form but in final form for consideration by the Senate.

As my colleagues before have indicated, there are elements and amendments to the legislation that should be supported. Unfortunately, as we see the legislation now, there are elements which are unnecessarily complex and areas that are unclear, not just for the financial services sector itself but, most importantly, for those people whom we in this place support and represent—that is, the actual consumers of these services. As we know, with an ageing population, it is becoming ever more important and critical that consumers are very, very clear about what they have before them, what options are available to them and what protections they have.

I was somewhat encouraged in reading some of the quotations of the Leader of the Government in the Senate, Senator Evans, in this place when he said, 'It is our responsibility to provide an alternative view for legislation, to speak out when we think things are wrong and to fight for those people whose interests we represent.' I applaud that and I look forward today for a lengthened opportunity for all of us to debate this legislation through to its conclusion, where I hope we might be able to undo some of the faults and errors of the legislation as it currently stands before us.

As others have said, we know that this legislation in its current form will cause increased unemployment, particularly in the financial services sector. Surely there is nobody in this country who wants to add to unemployment in any sector, including the financial services sector, where of course there are already additions being made to unemployment levels as the banking industry and kindred industries are shedding staff. The last thing we need is to be adding to unemployment.

The point is being made by my colleagues, and I will also make it, that the legislation as it is proposed will enshrine an unlevel playing field amongst providers. This will provide inappropriate levels of support for some sectors, particularly those friendly to government, and it will disadvantage those who are not. In other words, it is anti-competitive and nobody wants to see a lack of competition in the financial services sector because it is competition that is going to drive value for the end consumer, the very people whom we represent. As has been said by my colleague Senator Bushby, estimates have been made within the industry that it will cost some $700 million to implement and, even worse than that, $350 million on an annual ongoing basis to comply with. Those are conservative estimates and I, for one, believe that we need to address them. The coalition will be moving some amendments aimed at improving the legislation. Senator Evans is a great person to stand up and give us guidance for the future, as he did back in 2007, when he said that Labor in government or opposition supports the Senate as a strong house of review, scrutiny and accountability. I am looking forward today in this place to being able to honour, along with my colleagues on both sides of the chamber, those fine points made by Senator Evans that the Senate will be a strong house of review, scrutiny and accountability of this legislation.

There are several areas in which the coalition, through Senator Cormann, will be moving amendments. They relate to a regulatory impact statement on FoFA, assessed as compliant by the government's own Office of Best Practice Regulation. There should be no opposition to being able to undertake that sort of review, which the government itself wants scrutinised through its Office of Best Practice Regulation.

The totally illogical and nanny-state based opt-in on FoFA must be removed. We do not see it in other sectors. We know very well we are insulting people to say to them on an annual basis, 'You must sign a document because every year you must make the decision with your financial services adviser to opt in.' In banking and in any other area of business or social life, it logically follows that, whilst we have trust in the people who are offering us products and services, we continue to use them. Thank God in a free country like ours, where there is alternative opportunity for service and product, if we do not like the service or the product, we opt out. We do not have to wait for somebody to put a piece of paper in front of us on an annual basis. This is ample evidence of a flaw in the legislation as it is currently proposed that must be addressed.

Retrospectivity is something that is an absolute anathema. The retrospective application of the additional annual fee disclosure requirement must be removed. We cannot predict the past; we can only deal with the present and predict and plan for the future. Retrospectivity has no place in this legislation.

We support best-interest duty, but the way in which it is presented in this legislation must be improved upon, and the coalition's amendments will be aimed at doing that. There should be no reason why that is not the subject of robust debate in this place today. If the government can indicate why the best-interest duty as proposed in the legislation is best, let them argue that case. Let us have that robust discussion. The ban of commission on risk insurance inside super must be further refined, and I want to come back to that if I can.

Finally, the implementation of this legislation, currently planned for no fewer than 10 days from today, 1 July 2012, must surely be delayed to 1 July 2013 so that it can be aligned with the government's own legislation relating to MySuper. If amendments are discussed and debated, if there is the opportunity for robust exchange of views across the chamber, we will end up with a better form of legislation. There is no doubt at all that everybody in this chamber should be encouraging financial advisers to help Australians better manage their financial risks, to maximise their financial opportunities and to align their investments and the value of their assets for their best advantage and their families' best advantage into the future.

The goals of the legislation are to be applauded: firstly, to balance effective consumer protection; secondly, to have access to high-quality financial services; and, thirdly, the availability and accessibility of services that are affordable for all members of the community. We all want to see those things and they are well-placed objectives. But in this instance we have seen a failure of the Labor government that is so typical. There has been an inability to genuinely consult with those affected and to listen. Consultation is actually about listening; it is not about telling and then ignoring. We have to ensure that the consultation process is reflected in such a way that we do not add to the red tape burden. So many of us have learnt, as a result of representation from those in the sector, that this is going to add immeasurably to the burden of red tape, and we all know that that adds costs not only to the business but, inevitably, those costs are passed on to the end consumer.

As I said at the beginning of my address, there were a number of high-profile collapses during the global financial crisis. It is entirely appropriate that the government and the industry should examine the cause of those collapses and that we should move, either by industry practice or legislation, or a mixture of both, to minimise the risk of those collapses occurring in the future. That was what the Ripoll inquiry report was all about. The inquiry, led by Mr Bernie Ripoll from the other place, was well supported by everybody who participated and it came up with very reasonable recommendations. The centrepiece of the Ripoll inquiry report was the recommendation to introduce a fiduciary duty for financial advisers, requiring them to place their clients' interests ahead of their own. To me, as a person who gained a profession, as many others have done, I was disappointed that it was seen to be necessary to make a key recommendation that a group of professionals should put the interests of their clients ahead of their own. It led to the question of why that was necessary and whether there had been failure in the past. Nevertheless, that was the key recommendation and it must be supported. A key observation of the Ripoll inquiry in 2009 was:

The committee is of the general view that situations where investors lose their entire savings because of poor financial advice are more often a problem of enforcing existing regulations, rather than being due to regulatory inadequacy. Where financial advisers are operating outside regulatory parameters, the consequences of those actions should not necessarily be attributed to the content of the regulations.

That is a wise statement, but unfortunately this package has been hijacked by vested interests, and the recommendations of the Ripoll inquiry have not found their way into the legislation as it is before us today.

As I indicated earlier, these bills do not meet the government's own standards. According to the Office of Best Practice Regulation, the government did not have adequate information before it to assess the impact of FoFA on business and on consumers or to assess the cost-benefit of the proposed changes. Armed with that knowledge, it becomes almost compulsory for us in this place to deal with this matter in a way that is reasonable, reasoned and can lead to a better outcome.

Senator Conroy, now Minister Conroy, made this statement in this place when speaking to a trade practices bill in 2006:

You do not just need to be here in this chamber to realise how arrogant and out of touch this government has become, with the ramming through of legislation, ridiculously tight deadlines for legislation, changing the sitting pattern all the time and using the guillotine. It is turning this chamber, which for 30 or 40 years has been a chamber of accountability and scrutiny, into a farce.

I look forward today to the opportunity of honouring the sentiments expressed by Senator Conroy. A hope that we will not see this chamber turned into a farce by, to use his words, 'the ramming through of legislation, ridiculously tight deadlines, changing the sitting pattern all the time and using the guillotine'. I applaud Senator Conroy for those sentiments, and I look forward to his support today to ensure that such actions are not repeated.

The implementation time frame is unrealistic. It is now only 10 days before this legislation is due to be imposed upon Australia's financial consumers and the financial services sector. It would make eminent good sense to delay this for 12 months, to implement it at the time that MySuper is being implemented, because both of them are going to have a profound impact on the sector. It is symptomatic, unfortunately, of this current Labor government's chaotic approach and its lack of understanding of practical business realities that it seeks to impose on the sector significant and costly system changes, with two different implementation dates, in relatively quick succession. It would be more logical, more sensible, more cost-effective, for the entire sector and for this parliament, if this were to be delayed for a 12-month period, if we were to get it right, if we were to debate the amendments that are proposed by the coalition and if we were then to go forward in a way in which the sector would understand and implement it and consumers would have their financial impact minimised. That is very important.

The coalition strongly opposes Labor's push to force people to re-sign contracts with their financial advisers on a regular basis. That is the impact of opt-in. I cannot think of any instance in which opt-in would be preferable to opt-out. It is in fact an insult to consumers of financial services. It is an insult to them that they have to expect a document every year from their adviser which says: 'I'm doing a good job. Sign here on the dotted line.' Surely we should empower them. We should say to the sector: 'You must be more competitive. You must be better with your services. You must appeal to the consumer.' The consumer themselves could in that way have a far more definitive role in deciding who is going to provide those services for them.

I referred briefly earlier to the retrospective fee disclosure statements. The Ripoll inquiry made no recommendation at all to introduce an additional annual fee disclosure statement over and above the current regular statements that are already provided by financial services product providers to their clients. If the Ripoll inquiry, well supported by all sides politically, made no recommendation in this area, what is it doing in this legislation? What is the need for it? The opportunity should be available today in this place, when the coalition moves amendments in this area, for the government to explain why it is that retrospective fee disclosure statements have got to be introduced when no recommendation was made by an inquiry led by a member of the government.

The Financial Services Council has estimated that implementation of the fee disclosure requirements would cost approximately $54 per client for new clients and nearly double that figure, nearly $100 per client, retrospectively for existing clients. I ask: to what end; to what gain; who wins out of this retrospectivity; where is the value of that $100 to the existing clients?

It is not evident to me and it is not evident in the explanatory memoranda. Let us learn when the amendments are moved by Senator Cormann so that the government can explain it.

This is a place of accountability, as Senator Evans himself said, supporting the Senate as a strong house of review, scrutiny and accountability. This is the opportunity for this government to be accountable. I refer to the statement of the Prime Minister in August 2010 when she said:

People do want to see us more open, more accountable, more transparent. I am going to be held to higher standards of accountability than any Prime Minister in the modern age .

I challenge the Prime Minister to pick up the telephone to her Leader of Government Business in the Senate or to the duty minister and to say to the duty minister, 'I demand'— (Time expired)