Alex Gallacher (SA, Australian Labor Party) Share this | Hansard source

I rise to make a contribution on this matter of public importance—and it could not be a more important issue. With superannuation approaching $1.7 trillion and likely to continue on that expediential growth phase, I think there is nothing more important than making sure that the financial services sector is bound by some prudent guidance and regulations.

Interestingly enough, Senator Cormann categorises it all as red tape—'just a world championship effort at red tape'—but I would like to apprise the Senate of some information put before the Senate estimates on 4 June 2014, where the compliance department of ASIC gave a report on some of the work that they do on a regular basis. ASIC said:

The origins of the work that led to that letter were very broad concerns about the quality of advice being provided across the board in the financial planning industry. We had done a number of shadow shopping exercises that identified that, generally speaking, and it was repeated from one exercise to another, about 20 per cent of the advice was of very poor quality or legally inappropriate.

When asked what shadow shopping was, ASIC—the regulator that reports to the Assistant Treasurer—said:

That is where we engage real potential clients of financial planners and they would go to financial planners of their own choice, generally speaking, to get a financial plan. Then we had a panel, which was really made up of industry experts, that would look at the plans and do an assessment of the quality of them. Each time we did that we produced a public report setting out the results, and the results, to be frank, were very concerning because of the scale of the problem across the industry. It was not that we had isolated pockets of poor behaviour or anything; it was that there was an industry-wide problem of very poor quality advice. A lot of it associated—and this was again in the reports from those shadow shoppings—with problems of conflicts of interest.

So there we have it from ASIC, those who advise the Assistant Treasurer—and he comes into this chamber at question time and repeatedly says, 'It's red tape. It's nonsense. We don't have a problem here; look somewhere else.' ASIC have done consistent and prudent work in this area and they have found a consistent level of poor performance, questionable legality and potential and real conflicts of interest—which have been proven to them with these shadow shopping exercises. So why would we accept what is coming from the government front bench? I certainly do not accept it. It is not often that I would be on a unity ticket on this issue, but Senator Whish-Wilson's comments were very pertinent. This is about the banks grabbing back the big end of town, about wholesaling financial advice and about maximising their profits.

There has been much made of industry super funds. I have got an interest: I am a member of an industry super fund; I have been a director of an industry super fund; I have even chaired an industry super fund for a short period of time. Most of those people in industry super funds are not going to go out and buy a financial plan, not at the early stages of their career when their 9.25 per cent to 12-odd per cent is going in. It is usually the last thing on their mind. They are in a default option, they will get a financial plan when they are ready and usually with competent advice from their industry super fund. The big deal here is the self managed super funds where there is over $500 billion. Reasonably high-net worth people will now be right in the firing line for unscrupulous and dodgy financial advice. They will be out there to make a quid and there will always be someone out there willing to take advantage of the need to make decent return on an investment.