Sam Dastyari (NSW, Australian Labor Party) Share this | Hansard source

Great Southern, Trio and Commonwealth Financial Planning are synonymous with the abuse of trust that happened under the flimsy legal framework that existed before FoFA. All of these scandals have resulted in losses of almost $6 billion and have cost over 100,000 clients—many of them mum and dad investors—their savings, their homes and, in many cases, saddled them with debts that continue to grow. In the case of Timbercorp, the victims have been left paying double-digit interest rates on loans which, unfortunately, they had no idea they had taken out.

Before FoFA, for the financial advice industry the living was easy! It was easy to make a living ripping off the little guys. Unfortunately, a minority of financial planners used that opportunity to rip off thousands of hardworking, decent Australians. But the introduction of FoFA created a clear and long-overdue legal barrier to end dodgy schemes being pushed, with sales commissions or remuneration structures that ignored the best interests of the client. It is the slipperiest of slopes when the incentives are stacked in favour of selling a product rather than providing impartial advice in a client's best interest.

It is not just the sharks who are guilty of this; the big banks would prefer FoFA were changed to allow them to quietly whittle away at their clients' savings, with fees from those little extras that bank tellers were once able to pitch over the counter. Those tiny amounts add up quickly. The big banks' profits in this country totalled $29 billion last year—a lot of money that is no longer in the bank accounts of ordinary Australians. This is the secondary effect of commission based advice: in addition to taking money from clients, it is also money that does not go into the national savings pool. The current FoFA laws have been estimated to add $144 billion to our aggregate savings by 2027. This massive national windfall will be directly jeopardised by the repeals proposed.

Bernie Ripoll's FoFA reforms provided a strong legal framework to distinguish advice from sales. Our financial advice industry will not gain the trust of ordinary Australians until it makes a firm commitment to planning and tailoring advice, and explaining the possible risks to each client, whether they are saving for their first car, paying off a second mortgage or refinancing to grow a business. Of course, those who stand to gain financially from the old system want to go back to clipping the ticket, without the hassle of basic consumer protections. But their incentives should not dictate how our laws function. This is already bad policy and, with the government's proposed reforms, we now await some fascinating politics.

The minister, Senator Cormann, is an interesting character. While he favours some of the government's more extreme policies, he is also one of the government's shrewdest political operators. He knows that they are bleeding viciously after budget. Will he follow his ideological instincts and belligerently plunder the consumer protections in FoFA to appease a handful of sectional interests, who would love nothing more than to be taking fees and commissions once again? Or, as this debate progresses, will Minister Cormann be smart enough to back off?

It took Prime Minister Howard nearly 10 years before he over-reached and destroyed his own government. Will Minister Cormann, Treasurer Hockey and Prime Minister Abbott smash this record, by both plodding forward with a deeply unpopular budget and pushing changes to FoFA that will hurt ordinary Australians and present a clear and present danger of the kinds of collapses that triggered the changes in the first place? These reforms were put forward for a reason, and that reason was to protect consumers. They do not need to be watered down. This is not simply a matter of removing little bit of red tape. This is a wish list from the industry, who want nothing more than to go to the good old days, when they could set their own fees.

Today I met with Naomi Halpern, a victim of the Timbercorp collapse and a spokesperson for the Holt Norman Ashman Baker Action Group—a group of people who unfortunately were the victims of dodgy, crude and incorrect financial advice that they were wrongly provided.