Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Hansard source

I thank all senators who have participated in this debate. Let me just make clear again and be up front that the government's improvements to our financial advice laws are designed to ensure that people across Australia, who are saving for their retirement and managing financial risk through life, can access more affordable, high quality advice. Senator Whish-Wilson mentioned again, as he did in July, that the government was somehow rushing these changes through. Nothing could be further from the truth.

When the previous government introduced and passed through the parliament their Future of Financial Advice law changes back in March 2012, we were very clear to put the coalition policy on the record then and there. We said there were a lot of things in those reforms that we supported, but there was also a range of things where we thought the previous government went too far in imposing excessive and unnecessary additional red tape which pushed up the cost of advice without actually offering additional consumer protection benefits. If elected to government, we said we would improve those laws to remove all of the unnecessary and costly red tape that pushed up the costly advice, but we would keep all of the important consumer protections that matter to consumers—such as the requirement for advisers to act in the best interests of clients or such as the ban on conflicted remuneration. That is exactly what we have done.

It has been more than a year now since the last election—the election was in September 2013—and in that period we have released an exposure draft of our legislation to deliver on our pre-election commitments to people across Australia saving for their retirement. We have also introduced legislation into the parliament which has been subject to two Senate inquiries, and both the Senate inquiries recommended passage of the improvements that the government put forward. Any suggestion that somehow the government is rushing things here is just completely ridiculous.

We have to remember where this all started. It is true that this all started with the Ripoll inquiry, so-called, into Australian financial products and services. That was actually a very good inquiry. It was an inquiry that was conducted in a bipartisan spirit. The recommendations that came out of that inquiry were supported in a bipartisan way. But if the then Labor government and the then Minister for Financial Services, Mr Shorten, had stuck to implementing the recommendations which were made by that inquiry, we would not be having this discussion today. But Mr Shorten went a series of steps further than what was recommended by Mr Ripoll. The reason for this was that he was being egged on by union-dominated industry funds, in particular the Industry Super Network.

Madam Acting Deputy Speaker, I will just give you one example: Mr Ripoll, in the Ripoll inquiry report, never recommended introducing a requirement for investors to re-sign contracts with their advisers on a regular basis. The Ripoll inquiry received more than 400 submissions—and guess how many submissions proposed the introduction of the so-called opt-in requirement? Somebody give me a guess: how many submissions, out of more than 400 submissions, recommended that particular change? There was only one. And I invite the chamber to guess where that submission came from—it was from the Industry Super Network, which suggested that the Gillard Labor government should make Australia the world champion in financial services red tape by imposing this requirement. Incidentally, the super funds also said, 'make sure you exclude us from the scope of that requirement, so that when we provide intrafund advice, not only do we not have to disclose the fees that we charge—they can be bundled into an overall admin fee—but also we will not have to offer even the opportunity for people to opt out from that fee'. People do not know that they are paying the fee. They pay the fee irrespective of whether they access the advice or not. So Bill Shorten, as Minister for Financial Services, was doing special deals left, right and centre.

What is our objective with what we are doing here? The changes that we are making are not actually that dramatic. If you listen to the speeches by Senator Dastyari and Senator Whish-Wilson, you would think that we were going back to the Dark Ages somehow, with the changes that we are making. Let me just quickly take the chamber through the changes that we are actually making. As I always said we would do, we are removing the requirement to keep re-signing contracts on a regular basis—because that is unnecessary, additional red tape which does impose a cost, and that cost ultimately comes out of people's retirement savings, in the way of additional fees. Senator Ludwig talked about regulatory impact statements; well, guess what? The previous government did not do a regulatory impact statement on their changes, but we do know that their changes cost $750 million to implement, and $350 million, ongoing, in additional compliance costs. The changes that we have been putting forward—the changes which we put forward first in a regulation and which are now currently working their way through the parliament in the form of legislation—are delivering $190 million in savings by reducing unnecessary and costly red tape—that is, $190 million in savings every year. And—for all of us in this chamber—our objective should be that our financial services sector is as efficient, as transparent and as competitive as possible, so that competitive tensions force financial service providers to bring down the cost of providing advice, so that people across Australia—who are saving for their retirement and managing financial risks through life—can access financial advice and can do so in the most affordable way possible, and so that as little money as possible comes out of their savings to pay for all the unnecessary compliance costs. That is what we are all about.

The other suggestion that has been made, quite dishonestly, at various times by people during the debate over the last few months is that somehow we are getting rid of the requirement for advisers to act in the best interests of clients. That is just not true. The requirement for financial advisers to act in the best interests of their clients remains in the Corporations Act. It remains unchanged, in section 961B of the Corporations Act—as does the requirement for the adviser to provide advice that is appropriate, in section 961G; as does the requirement for an adviser to provide a warning if there is any incomplete or inaccurate information, in section 961H; as does the requirement for an adviser to prioritise their client's interests ahead of their own, in section 961J; and as does the requirement for licensees to ensure that their representatives are complying with these sections, in section 961L. So the proposition that, somehow, we are getting rid of the requirement for advisers to act in the best interests of their clients is wrong. We have clearly demonstrated that it is wrong. And, Madam Acting Deputy President, if you look at the agreement that we have reached with the Palmer United Party and the Australian Motoring Enthusiasts Party, as supported by Family First and by the Liberal Democrats, you will see that one of the features of that agreement is that we are introducing a requirement in the amended legislation to ensure that, in the statement of advice, there has to be an explicit mention of those obligations in the Corporations Act on the adviser.

Then there is the suggestion that somehow we are bringing back conflicted remuneration. That is not true either. Again, don't take my word for it. I have listened to the speeches by Labor and Greens senators. Labor and Greens senators usually have a very high regard for the ABC, but ABC Fact Check has looked very closely at the claims that were made by shadow treasurer Bowen. ABC Fact Check identified those claims as being false and inaccurate. They said that those claims were scaremongering. These are not my words; these are the words of ABC Fact Checkthat the shadow treasurer, Mr Bowen, was scaremongering. During the debate here, people have said, 'but people can still be paid when they provide advice'. Well, I did not think that the objective was to abolish all remuneration. But what we have supported all the way through, and what we have made even more explicit in these regulations which have been in effect since 1 July, is that any remuneration which would conflict with the advice given is banned and continues to be banned. Mr Shorten actually said that where incentive payments do not conflict with the advice given, they will be permissible. Well, I agree with him. That is what he said in his second reading speech, when he introduced the legislation. But somehow, now when we say, 'well, we agree with that proposition', we are going back to the Dark Ages! It is just completely false.

Various senators, including Senator Whish-Wilson, made reference to the events that have been widely reported in relation to activities by Commonwealth Bank financial planning. They are terrible stories; I agree with you, Senator Whish-Wilson. But they are stories in relation to a period between 2003 and 2005—that is, before the changes that were passed—with the support of the coalition—by this parliament. The best interest duty remains. The ban on conflicted remuneration remains. What we have done—and what these regulations do and what the legislation, which has been supported by two Senate committees, will do—is do away with unnecessary and costly red tape which pushes up the cost of advice wherever the previous government imposed it.

Everybody can come into this chamber and point to problems, and we can all agree that a particular circumstance is a serious problem, but the question is not whether we agree on whether something is a problem. The question is: how do we best fix the problem? Just because we agree that there is a problem does not mean that whatever you do makes things better. As policymakers, we have a responsibility to ensure that, when we try to deal with a problem, we make things better, not just more complex and more expensive. I know that it is a hard argument. I know that it is much easier to say, 'There is a problem—let's put in more red tape, let's give more powers to X, Y and Z and let's throw more money at it.' That is the easy, lazy way to go about things. We are going the harder road—I understand that—but we are going the road that is good for consumers and we are going the road that is in the public interest.

We believe Australia needs to have a regulatory system in place for the financial services sector that is robust but efficient, that is competitively neutral and that does not try to favour one segment of the financial services market by using regulatory power to try and give that sector a competitive leg-up against other sectors of the financial services market. That is exactly what then Minister Shorten did. He was totally driven in everything he did by giving a competitive advantage to one sector of the financial services market; whereas we believe that it is in the public interest to have a robust and efficient regulatory system in place that is competitively neutral, whereby Australians saving for their retirement and managing financial risks through life can have access to high-quality, affordable advice that they can trust.

What else are we doing? We are saying that we support annual fee disclosure requirements, which come on top of the fee disclosures that are already required to be provided by product providers. We support additional annual fee disclosure requirements by financial advisers, but we do not think that they should be imposed retrospectively. When you make a new change, that should be a prospective change, because if you impose that change retrospectively then you impose an excessive and unnecessary cost burden. That is not fair, it is not reasonable and it is not good public policy.

We also had to fix a couple of technical issues created by the Labor Party in their rush to get changes through. Talk about a rush, Senator Whish-Wilson—the Labor Party was always in a rush when it came to the Future of Financial Advice changes. The Labor Party has been on the record in opposition as saying that there is a need for some changes to the grandfathering arrangements. In fact, when we last spoke about this disallowance in July, that same afternoon, at the last minute, quite desperately, shadow Treasurer Bowen and the shadow minister for financial services, Mr Ripoll, for whom I have a very high regard, wrote me a letter saying, 'By the way, maybe we can do a deal.' They were complaining about the deal that we did with the Palmer United Party, the Australian Motoring Enthusiast Party and various other senators on the crossbench, but the Labor Party wanted to do a deal too. In that letter, they said: 'We agree that your changes to grandfathering arrangements are sensible. We think that if we could agree to make those changes only then we could come to an understanding.' I did not hear Senator Dastyari or Senator Ludwig today acknowledge that Labor stuffed up when it came to the grandfathering arrangements. I did not hear Senator Ludwig or Senator Dastyari explain to the chamber today that there were issues in terms of the impact on stockbrokers and the like of some of their ill-thought-out changes, which we have tidied up.

We are looking after the public interest. We are not doing anybody's bidding other than looking after the public interest. Of course, what we did over an extended period of time was assess all of the facts and be part of all of the Senate committees and all of the parliamentary joint committee inquiries over the last parliament. We have also monitored very closely all the discussions in more recent inquiries, and we have made judgements in the public interest.

Some people have made observations in relation to the notice of disallowance that was given by the Standing Committee on Regulations and Ordinances last week. I used to be a member of the regulations and ordinances committee and I know that we used to give these notices all the time; it is part of Senate housekeeping. When the regulations and ordinances committee want to give themselves some more space to have a longer look at something, that is what they do. They give a notice just before the expiry of the 15-sitting-day period asking some more questions of the government, which of course the government will respond to. We believe that we have all of the answers that are required to satisfy the regulations and ordinances committee. To the extent that there are any remaining concerns, they will be addressed on an ongoing basis as soon as the Senate has dealt with the legislation.

May I say again that the legislation to implement the commitments that we made in the lead-up to the last election has now been considered by two Senate economics committee inquiries—one which reported on 16 June and one which reported in late September. Both of those inquiries by the Senate economics committee recommended passage of the legislation implementing our improvements to the Future of Financial Advice laws.

I cannot remember whether it was Senator Ludwig or Senator Dastyari, but one of them said that we are making draconian changes. Let me remind the chamber that we are removing the requirements to keep re-signing contracts because we believe, fundamentally, that every Australian is entitled to decide whether he or she wants to enter into a short-term, a long-term or an ongoing contract. People across Australia are big and strong enough to make their own judgements as to whether they want to enter into a one-year contract, a two-year contract, a five-year contract or an ongoing contract. People across Australia, having access to transparent information, will be able to make judgements on whether or not they perceive that they are receiving value from a particular service provider. That is fundamentally what I believe. By making sure that we do not have this additional compliance burden which makes us the world champions in red tape, we are taking cost pressures out of the system, which will leave people saving for their retirement with more money in their own pocket and more money in their nest egg

May I say to the chamber that this disallowance motion ought to be defeated because it is not in the public interest for the excessive changes that were pursued by the previous government, in excess of the recommendations of the Ripoll inquiry, to remain. The changes the government made were sensible and they are indeed in the public interest. I commend them to the chamber.