Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Hansard source

I come at this as someone who has worked in a bank, understands financial planning and has grave issues about consumers of financial products

Also, I have seen firsthand the disasters that have been wreaked by a cultural problem in the financial services industry—and it is in the big end of the financial services industry. I do not necessarily see that issue amongst smaller independent financial planners. I have also met with smaller financial planners who had their licences through big firms, and I will say that lot of them are good people. They provide good service—good advice. If we have their interests at heart, if we have small businesses' interests at heart, what we have to do here tonight is disallow these motions, bring the legislation back, get it right for all stakeholders and send a message, through our legislation, that we do have tough laws in this country to provide the right financial advice for people and to provide the confidence that Australians need to go and see their financial planners. That is good for financial planners. That is good for the growth of their industry. They want more Australians to go and seek advice. Australians want to feel confident. They want to know who is an independent financial planner. They want to know that they can trust their financial planners. I accept the blow-ups and this whole debate that we have had in parliament have impacted the reputation of their industry. That is absolutely the reason why it is crucial for those small businesses, as well as for the customer who is seeking financial advice, that we actually get this legislation right.

Let me reiterate again that, whatever you say and whatever your argument, the fact remains that the key consumer group in this country and the key groups representing hundreds of thousands of pensioners do not agree, Senator Cormann—through you, Acting Deputy President—with the government's amendments to FoFA. They wanted to see a strong message sent. Let me also say this: on the so-called costs—this idea that we need to get the balance right and that somehow the provision of financial services is going to price out of the market financial services to a lot of people—those numbers were provided by the banking industry. They have not been tested. This legislation is only just coming into effect.

The Greens sensibly suggested that we have a five-year period where the full FoFA reforms were put through—but we will look at amendments—and where we then have an evidence-based approach for an independent assessment of the costs of financial services. I am sorry, but sometimes—while I am primarily focused on the public interest in this debate—special interests are not the same as public interests. I am very concerned that the banking sector lobbied—and we have all the evidence we need on this—very hard, it is no surprise, to get these changes to FoFA, and to get them through before 30 June. We have that evidence from the Senate inquiry. They lobbied very hard and Senator Cormann delivered for them. I am not bashing the banks; I have worked for one. I understand the financial system; I taught international finance for years at university. What I am concerned about is that special interests are not the same thing as the public's interest. We need to get this legislation right for the public, for the small businesses and for the reputation of the entire industry, which includes the banking industry.

The last thing that I would like to address is the idea of Fact Check—the ABC Fact Check. I noticed Senator Cormann—through you, Acting Deputy President—very deftly, in his interview with Alan Jones recently, avoided quite an important question by quoting Fact Check, and I have seen Senator Cormann do it in the chamber several times. No-one is disputing that commissions have been taken off the sale or the provision of individual products. That is not the issue here. The issue is that, in aggregate, we still have a volume-based incentive in place. That cannot be denied. In fact, I have the exact quote from your own legislation on the regulations, Senator Cormann, that actually talks about this. It is on page 27 of your own explanatory memorandum. It says:

… the Government intends to introduce a targeted 'general advice provision' that specifies that monetary benefits paid in relation to general advice are not conflicted remuneration as long as certain conditions are met.

And then it adds:

It is important to note that neither the no commissions limb, nor the general advice provision, prevents the payment of a salary or a performance benefit (such as a performance bonus paid subject to a balanced scorecard).

That is clearly the provision for a volume-based sales incentive program. And I will repeat it: you can call it commissions, you can call it a bonus, you can call it whatever you want, but I like to use the word 'incentive', because that word 'incentive' goes to the heart of conflicted remuneration. While there are incentives in place for financial advisers to recommend a product—because, whether it is on that individual product or whether it is at the end of the month or at the end of the year, they get a bonus based on the number of products they sell—that is still conflicted remuneration in anyone's language.

I will reiterate what I got told by an employee at one of the major banks recently. He said to me that his job was at risk because he had not met his sales targets. When his boss had talked to him about this, he said, 'I haven't necessarily felt that these products were the right things for the people I have been meeting,' and he was told in no uncertain terms his job was to make money for the bank. I was only told that in the last few weeks. Having worked at a bank, and having seen, through the Senate inquiry, what caused the Commonwealth Bank financial planning scandal, I know it was not just a culture at the financial planning level in these big vertically integrated organisations; it was up through the management, because they all benefited when their advisers are riding lots of business. That is why they covered up this scandal for so long, because while the music was playing they were all dancing, and they did not want to stop. They were all doing very well out of it, thank you very much.

I hope the Murray financial services inquiry will be looking at these types of issues. Why did we rush through these regulations before the Murray inquiry has released its findings? It is the government's own inquiry and it is critical to this debate. So let's get the legislation back. We know through ASIC that there will be no chaos, as we heard from Senator Abetz and others today. There is a grace period. We can go back to the FOFA—which, by the way, the banks were preparing for anyway, as were the financial planners. They were preparing for this for years. The idea that somehow they are all going to go out of business is just plain fearmongering.

I will finish with this. If we want to look after the small businesses and Australians who need financial advice, and even the reputation of the big banks—and let us not doubt that ANZ is under the pump with what we are discovering at the moment around the Timbercorp collapse; and there is a lot more stuff to come out, particularly if we get a royal commission up on banks—and if they want to do the right thing by their reputation, they should accept a strong set of laws and put their own self-interest, with unfounded estimates of cost blow-outs, aside and give it a chance to work. Give the Australian people the confidence they need to get financial planning advice and let's see if it works. Let's assess how many more people get financial planning advice, assess what it costs and do that properly. Let's not just take the word of the big banks that somehow this is going to blow out their costs or kill small business. Let's give it a go. We cannot do that until we disallow these regulations and get a proper set of legislative measures in place that satisfy all stakeholders. That reputational damage will not be removed till the key consumer groups in this country and the key stakeholders are satisfied. That is what we need to be doing as parliamentarians and that is what the Australian people expect.