Louise Pratt (WA, Australian Labor Party, Shadow Assistant Minister for Manufacturing) Share this | Hansard source

Like other Australians, I have had an absolute gutful of wrongdoing in the financial sector, wrongdoing that could have been abated with a royal commission that had been instigated in a timely fashion instead of this government having voted against it some 26 times. I have seen the very real and tangible losses absolutely devastating lives, and the tail of that continues to drag on because of this government's failings.

Labor's Future of Financial Advice—FOFA—reforms which required an annual opt-in to commission so people couldn't simply have money taken out of their accounts without their knowing was opposed by the Liberal Party year after year. Senator Bragg, who considers himself an expert in these matters, finally confessed that the Liberals had done the wrong thing in opposing it. And their opposition to the royal commission demonstrates that for too long we've had a government that's been in the pockets of the financial services industry.

This long awaited bill implements recommendations of the Hayne royal commission as well as the Tax Practitioners Board review final report. We know we need laws that have a proper framework for disciplinary systems for financial advisers—the previous system failed us manifestly. And finally we have before us a system that requires financial advisers who provide financial advice to retail clients to be registered.

I've seen the dire consequences of a lack of registration in terms of those who have access to tribunals like AFCA and whether they will or won't get a hearing and whether they will or won't get compensation. And yet we see, in the minds of consumers, the difficulties they had, particularly in the background, while the royal commission was being called for. I think about the victims of the Sterling financial collapse. They heard in the background: 'We can't trust financial systems. We can't trust the government. We can't trust what's going on. I'm going to opt for this particular scheme because it looks as though it's going to be bankable and it's guaranteed.' In fact, as we know, those are the very kinds of schemes that needed ironclad regulation and the effective oversight of government to prevent their losses.

It's really quite telling, when you listen to people who have been affected by bad financial advice, the way they have thought about it. In many cases, they've been seeking to opt out of what they see as a bad system. It's particularly telling that the breadth of the administration of financial advice left the most vulnerable, in that sense, out in the cold. So I'm pleased that AFSL holders will need to report serious compliance concerns to the disciplinary body and that clients and stakeholders should be able to report information about the conduct of financial advisers.

But, while we support this bill, we know there's a lot missing, and the way the government has got to this point is frankly embarrassing. This recommendation comes from a government that, for years, has actively worked against a royal commission into this very sector. It's watered down previous protections from FOFA, under the guise of red-tape reduction. Of the hearings that actually took place, when the interim report was finally handed down in 2019, we've seen, again and again, awkward displays from the government in implementing these reforms. The Liberals never wanted FOFA. They never wanted a royal commission. The royal commission itself inquired into the scandals that were going on in wealth management, and even now, years later, we are still catching up on the legacy of all of the problems that the royal commission revealed.

I am going to try and truncate my remarks, but I do want to note that my good colleague Senator O'Neill has outlined in detail the roller-coaster that good financial advisers have been on in jumping through the required hoops to meet the standards of these reforms. It's very concerning to me that we've had to go through this over and over again—with these debates having happened over many years and with advocacy that's come to our offices over and over again—and that it's taken all of this time to get to this point. Meanwhile, we see victims of financial collapse, such as the Sterling New Life collapse, still fighting for justice.

I want to thank the Senate for passing a motion to refer this issue to the Senate economics committee. I've been speaking to these people for many years. I watched what happened to them at the same time as the royal commission started looking at issues. I can't help but think that, if that royal commission had started earlier, there would have been somewhere for these people to go and their losses could, and should, have been prevented. Instead the scheme collapsed and their entire savings were lost. I've seen retirees having to go back into the workforce. I've seen people having to go to court to fight with their landlord in order not to be evicted after they paid hundreds of thousands of dollars in rent up-front. I've seen people not being able to afford health care. I've seen people kicked out of their homes—homes they have already paid more than $200,000 to rent for the rest of their lives.

We know that ASIC knew about these problems, and we knew that this product was re-registered and re-released. Yet it later collapsed again. We've had many complaints about the scheme, but they did not act in a timely manner to prevent further investments before the scheme collapsed. We know that victims have been told to apply to the Financial Complaints Authority if they want compensation, but in 2020 they suspended the processing of these claims. It really does bring into light the importance of this legislation, because the type of financial adviser you've been through, and the extent to which they're registered, gives you a claim of compensation—for example, before AFCA. So it's incredibly important to see this now tidied up inside this legislation, and I know that it will need to be scrutinised further and more closely.

I've seen an example currently before the courts where an adviser working for a financial management firm sold a product but, because the firm they worked for hadn't endorsed the sale of that particular product, they managed to get away with these people not having a claim before AFCA. That is extraordinary. I need to dig into whether this particular scheme before the Senate now will actually fix those kinds of problems in the future. It is absolutely extraordinary to me that a financial services company that is making profit off a product that is being sold can get away with saying, 'We didn't endorse that product and, therefore, that client has no claim to compensation and we have no liability for it.'

Some of these retirees have died while waiting for the government to do the right thing. They were told to wait because there was a new scheme that would help them get compensation—the compensation scheme of last resort—which the government is finalising and is yet to bring before this place. It is a scheme that leaves them out—in part because of the nature of financial advice that they did or didn't get. It is unacceptable and it is inhuman to have people lost in a swamp of bureaucracy when they had confidence that these products were properly regulated. They have been strung along for years and years and years waiting for justice and compensation.