John Williams (NSW, National Party) Share this | Hansard source

I would like to set the record straight in relation to what Senator Singh has just said. Senator Singh, when you were in government, where was the regulatory impact statement? You were required to do that, but you got an exemption from the Prime Minister at the time—I forget who that was; they changed pretty often. But I want to make this point. Conflicted remuneration and commissions are banned for professional advice and for general advice. That is a fact. There is no removal of that.

Labor's changes to FOFA when they were in government went too far and imposed too much costly and unnecessary red tape. Here is the point. Today, one in five Australians seek professional financial advice. We need to make it affordable and of the highest quality. I wish Senator Singh had been on the ASIC inquiry, with Senator Dastyari. Former senator Mark Bishop did a magnificent job when speaking on that TV program. I cannot understand why he is not still sitting in this chamber; that is beyond me. But, anyway, those are the political games that the Labor Party play.

The recommendations of the Senate inquiry we just completed were: get good advice; provide good financial products; and good, honest financial planners. I believe, Senator Moore, that most financial planners do their best. Sure, there are sharks out there and we have heard a lot of stories about them. When in government, the Labor Party unnecessarily pushed up the cost of advice for investors. Here is the problem: why the opt-in arrangement? That submission was put in by who other than industry super funds. I wonder who industry super funds are very close to. I wonder why, when you brought in your FoFA regulations, you did not have regulations on commissions from some of those insurance products. I look forward to finding out where some of those commissions and rebates on insurance products actually go. Many people say they go to the Labor Party. I look forward to doing some investigation on that.

Labor also introduced changes forcing consumers to re-sign contracts with their financial adviser every two years. The more time you spend, the more it costs. Mr Medcraft, the boss of ASIC, told the inquiry that compliance costs were huge. We had a session of bad advisers in bad products, doing the wrong thing and some even committing forgery and fraud. No doubt you will hear more about that in the future.

But our small changes to the FoFA regulations remove red tape and costs and do away with the opt-in arrangements. To say that the best interests test does not remain is simply outrageous. Look at section 961B—and of course A, B, C, D and F remain. Section 961G is removed because, in some cases, it leaves the legal advisers and financial planners open to being sued, as well as further costs and further regulation.

As I said, the interests of the client remain first and foremost. General advice, personal advice, no commissions—will those on the other side of the chamber please get that into your heads. There are no commissions or conflicted remunerations, whether it be on general, professional or personal advice.

I make the point that we want people across Australia who are saving for their retirement, managing their retirement or managing financial risks and opportunities throughout their lives to have affordable access to high- quality advice that they can trust. This is most important, especially when it comes to self-managed super funds, with almost $1.8 trillion of superannuation funds now stacked away for Australians for when they retire. Almost 30 per cent—around $600 billion—is in self-managed super funds.

Those people managing their money need the best advice to grow their investments, not to have it lost on risky financial products or on bad financial advice. You do not just get advice to put on a favourite at Randwick this Saturday, but some of the advice we have seen has just about been on a par with that. These people need the best advice so that they can collect their money when they retire, collect an income and not be a burden on the taxpayer. This is most important, but ASIC also need to do a job to see that those financial products out there are not shonky products.

I was on the original Parliamentary Joint Committee on Corporations and Financial Services, with Mr Bernie Ripoll. Storm Financial was doomed to fail. It was geared so high. People were mortgaged up to the hilt. And once we had a 15 to 20 per cent reduction in the stock market which, of course, happened during the GFC, in 2008, Storm Financial hit the brick wall. The sad thing is that so many people, particularly elderly people, who had mortgaged their houses and who had worked all their life, reared their children, educated their children, paid for their house, put a nest egg away and saw it was all at risk. The financial stress on them was terrible. I first met with them in January 2009, at Redcliffe, when I had been in this job for just seven months. It was a terrible situation. I believe no-one in this chamber ever wants to see that happen again, regardless of what side of politics you are on.

I would just reaffirm that the best interest test stays locked in concrete. The government are simply trying to remove some of the red tape and costs so that the compliance and administration costs of financial planners do not grow and grow and grow where they get to the stage where they have to charge so much whereby people will simply not seek professional advice. I will give you an example. A good friend of mine is a financial planner. He lives in the Hunter Valley. Recently, a gentleman came to him and said, 'I've got $20,000 I wish to invest.' The financial planner had to charge him $1,000—$600 for compliance costs and a $400 fee. Now, $1,000 is a lot of money out of $20,000. It is five per cent. But there was $600 in compliance costs. As I said to Mr Medcraft during our Senate inquiry, we need to license each and every financial planner. Each and every planner needs to be licensed with their history put on the internet, so you can check them out. Do they move from place to place? Do they keep losing their jobs and shifting organisations? We also need ASIC to have the power where, with one phone call, they can suspend that licence. Of course, a planner can have the right to appeal. Everyone has the right to appeal to the Administrative Appeals Tribunal. But I believe that these measures, in conjunction with the FoFA regulations, will give us a very good financial planning industry out there, because we have damaged them.

Through this inquiry we have damaged the reputation of the financial planners. It is most important that we restore that reputation, because only one in five Australians seek professional advice. I believe, as I said at the start here today, the huge majority of financial planners do the right thing in the best interests of their clients. These FoFA modifications, announced by the Assistant Treasurer, do very little as far as putting people's finances at risk. They do not put people's finances at risk. The best interest test does remain.

You get a financial statement every year. Do you have to see your planner every two years? Do we have to spoonfeed every Australian? Surely, when you get your statement every year, you can see your costs and charges and how you are performing as far as the return on your money paid to that financial planner I concerned. Give the planner a ring, have a chat with him, have a meeting with them. But no, you want it locked in law that the planner has to chase you up every two years. For a start, they have to give you a statement of your costs, of what they have charged. To go totally over the top will just mean more costs and we know what happens when the costs go up, people will not buy the product—in this case, buying the professional advice that so many people do need.

At the FoFA inquiry there were, in total, 16 recommendations in the dissenting report of the coalition. We are adopting two or three of those.

To say that these FoFA regulations have been wound back, leaving it open to open warfare out there in relation to financial advice, is simply wrong. The scaremongering must stop.

As I said—and I am sure Senator Whish-Wilson would be on par with me here—some of the recommendations from the ASIC inquiry that we have just completed, along with the FoFA regulations, will give us a very strong financial planning industry, an industry that the people of Australia can afford to trust—and not only afford to trust but afford to pay for, so people will seek professional financial planning and benefit from it. At the moment, far too many people do not seek advice from financial planners. As I said, four in five do not. As time goes on and that massive wealth of superannuation grows to some $3 trillion, $4 trillion or $5 trillion in the future—and it will—self-managed super funds more than ever will require that advice. So to say that the government is putting people at risk and winding everything back is simply wrong. There are a couple of changes to remove red tape and costs. The best interest test does remain in section 961B. I am sure Senator Dastyari agrees with me totally on that point. Senator Dastyari, I am sure you would. He returns a smile.