Deborah O'Neill (NSW, Australian Labor Party) Share this | Hansard source

I rise to speak on the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Bill 2021. I note the contribution of my Labor colleague Senator Sheldon, who gave a very fine and detailed contribution to the debate on this bill just before Senator Patrick's contribution. For those who are interested in what's really going on and the great shame of the government's failure to respond properly to the Hayne royal commission, I urge you to review Senator Sheldon's words.

The subtitle of this bill, 'Hayne Royal Commission Response—Better Advice) Bill 2021', is like the window-dressing of a shop where you go inside and find it really hasn't got anything you want to buy. This should be called 'One Tiny Recommendation Change From A Whole Lot Of Work That Hasn't Got Done By The Government Around The Hayne Royal Commission, Despite The Fact That They Promised You That They Would Accept It All Bill.' That should be its title, because that would be telling the truth.

Those of you who are in the chamber and in the local community will absolutely know of my long interest in the financial planning industry and the financial services sector and in the sustainability of the financial planning industry and its continued operation. However, I am continually troubled by reports from my contacts in the sector that the regulations are not promoting an ethical and transparent industry. Rather, this government's poor consultation and ignorance of the nuances in financial planning has meant that adviser numbers have fallen by nearly a third in the last few years. The industry is withering on the vine.

I want to acknowledge early work done by Senator Fawcett when he was the chair of the corporations and financial services committee. I was very pleased to work with him on that committee and deliver a bit of a road map for how things could roll out. Unfortunately, care in the rollout wasn't taken by this government, which turned its attentions to things like rorts and getting itself re-elected over actually serving the Australian people. The consequences are what we see today: this broken industry of vital importance to Australians' financial wellbeing.

The Hayne royal commission, if people can remember it, rocked the entire Australian financial industry to its core and ushered in some much-needed and long-overdue changes. It held many white-collar criminals accountable and it sent a clear message to the industry that practices like overcharging or fees for no service are unacceptable and will not be tolerated. That was the mega-message: you can't charge money for nothing. That was it, in a nutshell.

However, the best intentions are often not followed through by the government, who have failed to ensure action was taken and to deliver appropriate regulation. This has certainly impacted on the financial advisers who provide such important guidance to Australians who want to grow their wealth and manage their finances in a way that gives them the best sense of having independence, particularly as they age. I'm hearing very troubling stories of adviser suicides, and I don't say that lightly. I urge anybody who is triggered by me mentioning that to seek advice from Lifeline or any of the other great institutions that provide support in our community, such as the Black Dog Institute. But I am very concerned to hear that people who were running successful businesses have become so despairing of the capacity to run their business that they've seen no way forward.

They tell me also of the ongoing impact of their requirement to pay ASIC payments that are invoiced after the fact, at the end of their year of work. It's really impacting on those businesses very significantly.

I can hear noises coming from Senator Hume, who is here, and I do know that there have been some announcements by the government. But everyone in Australia knows that announcements by the government and action by the government are two very, very different things. So there is a slowly diminishing pool of advisers, and that is further increasing the costs. The Australian Financial Review now predicts that the costs of receiving financial advice have risen 12 percent in the last year due to a patchwork of poor regulation from a government that says it understands business and actually is good at managing your money but is proving itself to be absolutely not in line with that articulation of its own version of itself.

As reported to me by a local Central Coast adviser: 'If the government were looking to destroy a profession, drive up fees and push out any non-institutional advice firm, they couldn't have done a better job. We must look towards regulating this industry in a fit-for-purpose manner.' That's a voice from the industry itself that has been willing to speak to the government, has been waiting to speak to the government, has been wanting to speak to the government for three years and got the big hand and told, 'Don't talk to me.' That's the problem: this government is more interested in its own survival than the survival of hardworking Australian businesspeople and the jobs that they provide for our community.

The bill that sits before us, as Senator Sheldon very clearly outlined, implements just one recommendation—that's recommendation 2.10—of the Hayne royal commission by establishing a single disciplinary body for financial advisers and legislating the requirement that all financial advisers who provide personal financial advice to retail clients be registered. It also implements recommendation 7.1 of the Tax Practitioners Board review, which recommended that a new model be developed for regulating financial advisers in alignment with the implementation of recommendation 2.10 of the financial services royal commission final report.

The bill's also going to wind up FASEA and transfer its functions to the Financial Services and Credit Panel within ASIC to streamline regulation and ensure that all cases of misconduct are dealt with. It also creates new penalties and sanctions for financial advisers who breach their obligations under the Corporations Act, as well as a new registration system for advisers. The Hayne royal commission recommended this regulation after it found that the financial advice sector lacked an appropriate regime for dealing with professional misconduct. So, basically, it was like a cowboy's club—you could get away with doing anything; no-one was watching—and it fed on itself and competed with itself in a race to the bottom in terms of service provision.

The royal commission identified a need to streamline all complaints into a one-stop shop, rather than the multitude of avenues previously in place, and to introduce less severe penalties to deal with minor events as ASIC had investigated and punished only serious complaints due to the top-heavy penalties available to it. There you have the reveal of a government that doesn't do its day job properly. It shows up, collects the pay on the way through, comes in to govern as little as possible, and just lets the market rip. Even when it's given guidelines and recommendations by its own committees—committees of the Senate, committees of the House, experts who want to talk to it—it just ignores so much of the really hard work that has to be done and show up for power's sake only.

I support the implementation of the regulations that are proposed here, because, for too long, malicious financial advisers had engaged in the worst kind of rent-seeking behaviours—fees for no service, grandfather commissions, in-house product sales that posed as independent advice from planners locked into dealer networks. The royal commission revealed that, in 2018, roughly 65 per cent of the financial advisers didn't hold a relevant university degree and that there was a culture of ensuring revenue before ensuring service. Commissioner Hayne described it as the three most common types of misconduct—and I thought this was very pithy and absolutely accurate—'selling what you can't deliver, selling what you won't deliver and selling what you don't deliver'. That was the practice described by Commissioner Hayne into what was going on in the financial services sector.

The power imbalance between planners, the dealers group network—by which a large financial institution would hold an AFSL—and registered planners has come under scrutiny during and after the royal commission, particularly regarding the AMP advisers, who were profoundly affected by a buyer of last resort catastrophe with AMP. As with franchisees and franchisors and a non-unionised worker and a boss, the power imbalance between those two entities resulted in terrible consequences for smaller players and incredible profits for big banks, which got themselves an AFSL and then brought all of these young inexperienced people in with no qualifications and started trotting them out as financial advisers, some of them with only eight hours online training. They were sent out to take people’s entire life savings into their hands and direct it on a pathway that was for the benefit of the banks’ wealth arms rather than for the benefit of the consumers.

With regard to the ASIC levy, on paper it sounds like a great reform, charging financial institutions a levy to pay for investigations into malfeasance. But most of the large financial institutions, the banks, were the ones who the royal commission found responsible for the type of behaviour I just described. Most of the malfeasance was theirs, but they rapidly existed the market and exempted themselves from the levy. That left the levy to be paid by the remaining advisers, the decent ones that were still hanging around, lots of them small and medium businesses. Subsequently, the costs have been borne by them and have risen exponentially. This year it’s predicted to rise another 30 per cent, and even the most diligent and careful advisers are being billed for it.

The small and independent financial advice sector has been devastated by the government's changes and poor implementation of the royal commission recommendations. The FASEA exams have been described to me as appalling and irrelevant to the financial services industry, despite their good intent and dire need.

There were roughly 28,000 financial advisers; now there are 19,000. It's expected that more and more of them will fall. ASIC had reported that 6,500 had left the industry, but only 163 had joined.

The big four banks have all retreated from the wealth management market and they've jettisoned their advisory arms. While I support a more independent network that's more agile and less dependent on big financial institutions, this move only reinforces that many financial institutions no longer see the sector as profitable without a large portion of them selling their in-house product for their profit or without corrupt and exploitative practices that were exposed during the commission.

The bill isn't a panacea. It doesn't fix or resolve the current issues that threaten the sustainability of the Australian financial planning sector. It does propose some noble and needed reforms that will make the sector stronger and more ethical, but it shouldn't stop here. The government can't just wash its hands of the financial planning sector. It needs to actually listen to the financial planners and adjust the reform package to make the industry more viable.

Seeing as we've been talking about regional Australia—and I do live in a region of Australia that is outside a major city—I know what it's like when your kids can't ever get a bus to work because there's no public transport system, where jobs are hard to come by and are very insecure, where wages are less than you get in the cities and where we are often overlooked by this government, and where—conveniently!—we on the Central Coast are joined into and out of Greater Sydney at the will of the state government. I live in one of those regional areas and I travel around this wide state very, very frequently.

Financial planning businesses that were vital in places like Dubbo, Albury and Wagga Wagga all got caught up in this. They did not get proper representation by the Nationals members that they sent to this parliament. Their voices weren't heard. And the services that they provided have disappeared, and the jobs that they created and provided have disappeared. It's not good enough. This is not a government that looks after small businesses. It is not a government that understands wealth creation for Australia, because, if they did, they would have done a much better job in the eight years that they've been in than this single amendment at this stage.