Lisa Singh (Tasmania, Australian Labor Party, Shadow Parliamentary Secretary to the Shadow Attorney General) Share this | Hansard source

This is an important MPI, an MPI where the government attempts to wind back Labor's financial advice reforms. These advice reforms give protection to consumers against dodgy advice, reforms that were to come into effect on 1 July this year. Among many other things, these reforms would have banned commissions in any form and required financial planners to write to each client telling them how much money was being silently removed from their accounts to pay ongoing commissions. On Thursday last week, Senator Faulkner asked the Acting Assistant Treasurer, Senator Cormann, a question without notice. He asked him to come clean on his opaque actions with regard to the tabling of the Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014 and whether the Treasury had issued specific instructions to delay the tabling of them. Such a delay might be used to frustrate scrutiny of the regulations, the subject of much controversy, and be considered an attempt to avoid the exercise of the Senate's power to disallow those regulations.

Senator Cormann was unable to provide any justification for such a delay. Senator Cormann was unable to provide any explanation of why the FoFA regulations were provided to the Senate Table Office on 1 July, ready for tabling on 7 July, the next sitting day; but then, subject to a request from the Treasury, were not tabled. There was no justification in Senator Cormann's answer to Senator Faulkner's question about delaying the tabling of these regulations.

In this case, we saw Labor senator, Senator Dastyari, table these regulations with the support of the Senate and thus ensure that they could be properly considered. This was despite the coalition trying for days to avoid such Senate scrutiny. The opposition is not alone in seeking to hold the government to account for the errors and the bad policy in its FoFA reforms, which, as outlined in this MPI moved by Senator Moore today, clearly outline that dodgy practices will be able to go on if these reforms were to come into effect. Labor is not alone at all. In fact, Labor is joined by a huge sway of civil society, which represents consumers and seniors, including National Seniors Australia, representing some 200,000 seniors or more across the country. National Seniors have called on the parliament to disallow the government's regulations. National senior chief executive Michael O'Neill said: 'These regulations wind back vital consumer protections introduced after corporate collapses left thousands of elderly Australians destitute.' In light of what Michael O'Neill has stated, why would a government want to introduce regulations that do exactly that—that wind back those regulations that ensure that those consumers, those seniors, will be protected from dodgy financial advice?

Michael O'Neill is not the only one joining with Labor in opposing the government's dodgy FoFA reforms. The consumer watchdog Choice is also opposing these provisions. In a media release on 20 June, Choice called on all federal politicians to oppose regulations that will wind back these essential protection for consumers seeking financial advice. The Chief Executive Officer of Choice, Alan Kirkland, said, 'Conflicted and poor financial advice has cost consumers billions and in too many cases led to people losing their homes and their life savings.' This is why consumer protections were originally needed and exactly why they should not be removed. This is why Labor acted. This is why the landscape in relation to financial advice would have, and should have, changed on 1 July. But through attempts by this government we are now left in this situation. And the government has been left in the embarrassing situation of having us debate this MPI today to put on record how clearly backward the government's proposals are—proposals which, as Choice and also National Seniors have outlined, take this country backwards.

Labor's reforms, I want to make it very clear, were introduced in the wake of the collapse of Storm Financial and others and the subsequent parliamentary inquiry into financial advice products and services. They were the most significant reforms in financial services for a generation and included several measures designed to protect investors and help the industry professionalise. That parliamentary inquiry went to great lengths to come forward with recommendations. What came out of that were significant reforms, adopted by Labor, including: the best interest duty, which required advisers to act in their clients' best interests; requiring advisers to get their clients to opt in to receive ongoing services every two years; requiring statements to be sent to clients annually disclosing fees and details of services performed; and a ban on conflicted remuneration such as commissions paid to financial product providers and financial advisers.

The whole basis for introducing the FoFA reforms was to restore faith in a sector rocked by a high-profile collapse, a poor culture of product sales over advice, and now, with some $1.8 trillion of savings, to ensure that Australians are getting advice and services that are in their best interests. During the reform process, over many years, there was extensive and intensive industry consultation that clearly identified the path to achieve growth, protect consumers and restore trust by changing the culture of the last 20 years, by lifting standards and professionalising, and, most importantly, by acting in the clients' best interests.

Then the government announced its changes to the FoFA reforms which basically did the opposite. That is why the reforms have been opposed so strongly by consumer groups and seniors groups. What do they do? They remove the essential catch-all provisions in 'best interest', which adds a loophole for advisers that means 'best interest' will become ineffective; they scrap the opt-in requirement, allowing advisers to continue to charge fees; they amend the annual disclosure requirement such that advisers only have to provide annual disclosure to clients who commence with them after 1 July; and they lift the ban on conflicted remuneration. The ban on conflicted remuneration will only apply to commissions on general advice; other forms of conflicted remuneration will be allowed, including as part of a balanced scorecard approach for both general and personal advice. All the government's words and comments on their changes to FoFA are about certainty for the sector perhaps but not for the consumer; they are certainly weighted in the wrong direction.

The minister says people who are opposed to the changes are vested interests with political motivations. Is the minister saying that National Seniors, the Council on the Ageing, Choice and even Alan Jones are part of some vested interest, some political conspiracy? The government makes much of the fact that it is banning commissions. The commissions were already banned—by Labor—so the way they carry on about banning commissions is nothing but a stunt. Senator Cormann told the Financial Review that 'at no point has the government sought to reintroduce commissions or conflicted remuneration for financial advisers'. Well, a simple glance at page 28 of the explanatory memorandum to the bill proves that reintroducing conflicted remuneration is exactly what the government has sought to do. By getting rid of the opt-in provision the insidious practice of charging fees without people's consent, or even knowledge, is back on to reduce their life savings—and that is immoral. (Time expired)