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

I move:

That the Senate take note of the answer given by the Minister for Finance (Senator Cormann) to a question without notice asked by Senator O’Neill today relating to the regulation of financial advice services.

Why this is so important to Australians right now is that—and this is indirectly related to the question that was just asked of Senator Cash—we have a superannuation fund allocation. Australians have that now because Labor established superannuation for all Australians. And it is because of that growing amount of funds that there is an industry that has grown up on the back of it. There are about 11 million workers in Australia and about four million pensioners. That is 15 million people with funds now, because of the vision of Labor; people with funds in their superannuation—funds that they want to make good decisions about, and so go and seek financial advice on.

It is on the back of the growth of that industry that we have seen those opposite play to their bedfellows at the top end of town and take away the rights of ordinary Australians to have access to quality and professional advice. We have seen this government doing deals to get its Future of Financial Advice reform through this place—trying to do it as quietly as possible. But we have news for them. There are 15 million Australians who are interested in this. They are watching. They are listening. And they are disgusted. They are absolutely disgusted, and none more than the seniors, who will not be ignored.

You can try to avoid the scrutiny of the parliament by coming in here and giving the most lacking answers, as we have seen here today, and you can try to avoid the scrutiny of this opposition, but we will fight for ordinary Australians. We will make sure that the concerns that have been raised right across this country this week, about the shameful deal that has been done in limiting the scope of openness and transparency with regard to Future of Financial Advice, are heard. We will continue to fight to make sure that that transparency becomes a reality for Australians, because whatever was achieved here yesterday with that dirty deal is not good enough for Australians, and we will not let it rest.

Question time is when the government and ministers should be accountable to the people of Australia, but we see, day after day, with the answers from Minister Cormann, a mockery of this parliamentary process. What we see I think is very well articulated in The Australian Financial Review of 15 July with this comment from Phil Coorey, who started his article on the FoFA backflip by saying:

Clive Palmer has attracted an avalanche of criticism from seniors groups after he cut a deal with the federal government to save its changes to water down Labor’s Future of Financial Advice laws.

…   …   …

Seniors groups, which were not consulted about the last-minute deal, said the conditions were a nonsense and would do nothing to replace the safeguards removed by the Abbott government.

Seniors Australia is not the most out-there, radical organisation that I have ever come across, and I was pleased to meet with Michael O'Neill recently in one of his visits to this place. He has made himself available to both those in the government and those in the opposition—and, no doubt, to those on the crossbenches—to put articulately the case for why we need proper FoFA legislation and proper support for older Australians and those who are seeking financial advice. In the article, Michael O'Neill, the Seniors Australia chief executive, is quoted as calling the extra conditions a nonsense, and as saying:

All they are is part of a grubby deal … They have treated older Australians with contempt.

And he is right. The minister would not admit that today, but Michael O'Neill is absolutely right. And he is supported in this by Ian Yates, the chief executive of the Council of the Ageing Australia, who, we read in the article:

… said the conditions did nothing to replace the protections removed by the government, “in particular the catch-all best interest protections and the banning of conflicted remunerations”.

Let us be clear about what we are talking about, with the best interest test. Australians have this money, these nest eggs that they have acquired, through Labor's legislation and push for superannuation. It is money that they take off to talk to a financial adviser about. Most Australians would go to a financial adviser and expose their entire financial situation, in a relationship that they would expect would be trusting. Just as you would if you were to go to a doctor or a lawyer, you would expect them to act in your best interests. That is not the case. And what we have seen is commissions paid to financial advisers—trailing commissions going on and on, ad infinitum—where Australians have not been given advice that is in their interests but rather have been given advice that is in the interests of the financial adviser. And, after what happened here yesterday, they are no safer. This is explained quite articulately by Peter Martin— (Time expired)

Concetta Fierravanti-Wells (NSW, Liberal Party, Parliamentary Secretary to the Minister for Social Services) Share this | Link to this | Hansard source

I rise to respond to some of the comments that have been made by Senator O'Neill. Can I just underline that the Senate's vote in support of the government's improvements to our financial advice laws is good news for consumers and for small business financial advisers. The most tangible change is that investors will not have to re-sign their contracts with their advisers on a regular basis. Can I just underline that these changes—contrary to the scaremongering that those opposite are trying to peddle—have been assessed by the Office of Best Practice Regulation to reduce red tape costs by $190 million a year. Other changes are more about enhancing competition and certainty in the market, and will deliver benefits for investors over time.

Let me just summarise. The Senate has voted, in my view, for more affordable, high-quality financial advice by removing unnecessary and costly red tape, but, at the same time, maintaining the all-important consumer protections that matter very much to consumers. Let me stress that, consistent with our commitments before the last federal election, the statutory requirement for financial advisers to act in the best interests of their clients remains in place, as does the ban on conflicted remuneration.

It does not matter, Senator O'Neill; you can peddle as much as you like of your misinformation on this point. It remains that that is not the situation. And can I just stress again that the Senate voted for changes that are more affordable and maintain the important consumer protections that matters so much. The statutory requirement for financial advisers to act in the best interests of their clients remains in place, as does the ban on conflicted remuneration.

The government appreciates the constructive approach that has been taken by crossbench senators in discussions about our financial advice laws. Our goal remains to ensure that we have a robust but efficient financial services regulatory system which is competitively neutral so that people saving for their retirement or managing financial risks through their life can access high-quality advice they can trust and which is also affordable.

Could I just put this into context. Labor's changes to our financial advice laws—so-called FoFA changes—went too far and we believe that they imposed unnecessary and costly red tape. They unnecessarily pushed up the cost of advice for investors and reduced competition, meaning that there was less choice for consumers. Changes like forcing consumers to re-sign contracts with their financial advisers on a regular basis have made Australia the world champions in costly and unnecessary financial services red tape. If Labor's FoFA changes had remained in place, without variation, it would have put access to high-quality advice beyond reach for too many Australians who need it. We want people across Australia who are saving for their retirement, managing their retirement or managing financial risks and opportunities throughout their lives to have affordable access to high-quality advice that they can trust. For this we need appropriate levels of consumer protection and regulations and an ongoing commitment from all providers in the financial services industry to continue to lift professional, ethical and educational standards.

We announced our policy to improve Labor's FoFA laws. As the minister said in question time, our position has been clear for over 3½ years. We have been informed by findings of the coalition members of the Parliamentary Joint on Corporations and Financial Services inquiry into Labor's FoFA laws in 2012. I believe our changes provide the right balance for consumers.

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

I rise to also take note of the answer given by Senator Cormann to Senator O'Neill's question. I think there is a lot of political argy-bargy, red tape, no red tape, 'make it easier' and 'make it cheaper'. But I wanted to address a couple of things first. It has been made very, very clear in Senate estimates that ASIC has identified a systemic problem in financial planning. Up to 20 per cent of planners have given conflicted and potentially illegal advice as a result of their shadow shopping exercises. We also know that a great proportion of the superannuation industry at the moment—the exponentially growing sector of self-managed super funds—is regulated by the ATO. We also know that the finance minister and Assistant Treasurer has made cuts to the ATO. In this area of alleged budget emergency, there have been over 1,000 jobs cut at the ATO. In questioning at Senate estimates about what impact that would have on regulation of superannuation, particularly self-managed funds, it was very, very clear that there are not enough people to do it.

The Assistant Treasurer and finance minister has cut 1,000 jobs out of the Public Service when they actually generate $6 of income in an area of budget emergency—totally irrational stuff. Can the industry self-regulate? Clearly not, because the economics committee found in its inquiry that the Commonwealth Bank did not deal honestly with the regulator, ASIC. ASIC is on the record as saying, 'The Commonwealth Bank did not deal honestly with us.' Therefore, many thousands of people—which, if the media is correct, include the Treasurer's mother and the parents of another member of the House of Representatives—have lost substantial funds under the regulatory system as it currently stands. To classify all of that as red tape—that is a factual situation. I am not making a political argument here. I am repeating facts that have been presented to the Senate in estimates and facts which have come out of a very substantial inquiry into the financial sector. To have it all blown up as 'it is all red tape' and saying that we are the world champions of red tape—I am not sure that the Treasurer's mother or the parents of the honourable member in the other House would accept that as an argument. We really do not think there is a huge impost on people to have a best-interest duty, requiring advisors to get their clients to opt in to receive ongoing service every two years. We do not think that is red-tape world championship material or that it is all that onerous. An annual disclosure—statements to be sent to clients annually disclosing fees and details of services performed—sounds like common sense. And a ban on conflicted remuneration.

It has been stated in this chamber by Senator Cormann and others that they are not lifting that. But we believe there will be a partial lifting of the ban on conflicted remuneration. It will be opened up. The definition is, I think, 'personal advice and not general advice'. So there is a sleight of hand there which will allow those experts in this field to take advantage of conflicted remuneration. I think that most workers will not get too many financial plans in their lives. The stat that is thrown out here is that only one in five get a financial plan. If you are on award wages and you are getting the superannuation guarantee, you do not necessarily need a financial planner to tell you to pay your house off and keep going in super. But that one-off opportunity when people come close to retirement, they have got a nest egg, they need to get their affairs in order, they should be assured that they are going to a financial planner who has got fair dinkum and good, solid regulations applying to them. The opportunity is for those people to take some conflicted remuneration and steer people the wrong way. If we look backwards, there is an evidence trail that people have been given wrong, conflicted and bad advice, and it has cost them very dearly. This chamber should not have supported—unfortunately, it did yesterday—an avenue for that to be exploited in the future. (Time expired)

Bridget McKenzie (Victoria, National Party) Share this | Link to this | Hansard source

Senator Gallacher sits down with his ringing requirement for good regulation. At the end of the day, Senator Gallacher, older Australians need to actually be able to afford it. They need to be able to access advice that will assist them in to their retirement, advice that is affordable, accurate and based in sound practice. Going to Senator O'Neill's question, she asked the minister how the change that went through the Senate last night is meeting another election commitment from this government and what the cost is going to be for small business. I welcome the Labor Party's newfound concern about additional costs to small business. I urge them to get on board to repeal the carbon tax and the $11 million a day impost to the whole economy that their bit of regulatory burden gave our economy. But I do digress from the question in front of us.

Senator O'Neill is using as the basis for her spurious question a report from Money Management on 14 July, 'Treasury disowns key FoFA research'. She has actually based her questions on rubbery figures. In fact, the ABC Fact Check also saw that these issues continually raised by the opposition on the cost to small business are based on false figures. The article states:

The Federal Treasury has denied it has endorsed the validity of research conducted by Rice Warner on behalf of Industry Super Australia …

I believe that stands at the heart of Senator O'Neill's questions. The measures that we did pass do not go in any way to endangering older Australians being able to make sound financial decisions about their retirement. Indeed, I have been lobbied and contacted by small businesses right throughout my electorate who are running financial advisory services. They have an ongoing relationship with their clients and deliver value over and over again. They do not want to see a reduction in consumer protections for the return of commissions on superannuation investments.

There are three issues I want to raise. Firstly, on the issue of commissions. We hear from the opposition that the amendments do not allow commissions to financial advisers, investment or superannuation products. I do not think that older Australians should actually be paying for a bank teller to open a term deposit and be required to be paying for these things. Financial advisers do not provide general advice. They provide personal archive which requires that they fully understand the client's situation and objective before making any recommendation. In this scenario, commissions are still banned under the amendments.

Best interest duty remains under the amendments. The amendments seek to modify the test and the client knows what to expect of their adviser, that the client actually has increased financial literacy—appropriate checks and measures. Another Storm collapse will be unlikely. There have been claims throughout the media, spurned on by the opposition, that we would be subject to the sorts of issues surrounding the Storm collapse. That is simply not the fact. We have promised to do what we said we would do. We removed the requirement for an investor to keep re-signing contracts with their adviser on a regular basis. We have simplified and streamlined the additional annual fee disclosure requirements. We have improved the operation of the best interest duty and we have provided certainty around the provision and availability of scaled advice. Consistent with our comprehensive statement of 20 June 2014, we are going to provide clarity and certainty for the financial advice industry and investors. The government's changes have been implemented through the regulations that we have been able to get through the Senate.

I point the opposition to ABC Fact Check, which described assertions by Chris Bowen that the government was bringing back commissions or conflicted remuneration for financial advisers as inaccurate and scaremongering. The ABC Fact Check website says that the opposition and the shadow Treasurer are basing their whole arguments on inaccurate information. (Time expired)

Sam Dastyari (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I also rise to take note of Senator Cormann's answers. Less than 24 hours ago in this place, we saw a dirty political deal done to allow this government to force through and maintain their changes to the Future of Financial Advice that Senator Cormann had been so desperate to introduce but had completely failed to sell to Australian consumer groups—a deal to maintain a set of regulations that not one single consumer advocacy group in this country remotely supported. The letter tabled in this place by Senator Cormann yesterday has no effect; it does not change anything. As soon as Phil Coorey's Palmer United press release arrived in letterboxes around Australia, journalists began doing what they should have been doing—that is, working the phones and calling bank compliance officers and financial law experts. By yesterday afternoon, the truth started coming out and what everyone is reading today: despite the endless, robotic, monotonous, ad nauseam repetition from this government and in particular Senator Cormann, the consumer protections contained in FoFA were not red tape; they were protections designed to make sure that consumers and hardworking Australians were not being ripped off.

Mr Deputy President, through you I say you to my friends in the Palmer United Party and my friend Senator Muir, of the Australian Motoring Enthusiast Party, as I said in this chamber yesterday: you have been sold a pup. You have had the wool pulled over your eyes. How can anyone think for a second that the Abbott government is going to give you concessions of any consequence in a deal that was pitched over a bottle of wine and announced in a front-page splash?

As we on this side of the chamber have said again and again, this is a government that cannot be trusted. It cannot be trusted to look after the interests of Australian workers when those interests come in conflict with those of dodgy financial advisers and Liberal Party donors. Why on earth has this government decided to side with the financial interests of a handful of crooks, criminals and con men?

The member for Fairfax gave Phil Coorey of TheAustralian Financial Review a four-point plan. I want to use my remaining time to dissect that plan. Firstly, it requires a legally binding statement. Wink, wink—all that has actually been agreed to here is a bit of paper. That is all—a bit more red tape. Let us be clear. Advisers either comply with the Corporations Act or they do not. The government complains about red tape. All they have done here is make a harebrained addition to the administrative burden of the financial advice industry, without any attempt to change the behaviour of that industry.

Secondly, Mr Palmer has demanded that clients are provided with a fee disclosure statement. That sounds sensible, but it is plainly explicit in Senator Cormann's letter that this is already a requirement. This was a requirement as of July 2013. But it is just a requirement that clients are informed of these fees. It does not ensure that they agree to paying them. Thirdly, a 14-day cooling off period may sound appealing, but, again, Senator Cormann has given the Palmer United Party something that already exists in the Corporations Act. It is there in section 1019B. Finally, the fourth demand of concession given so generously by our friend on the crossbenches is an escape clause allowing investors to switch strategies in the event of underperformance, which, again, we already have. This four-point plan is utterly meaningless. It is not worth the paper it was printed on minutes before it was brought into this place. This letter, this grand bargain, is nothing but a cruel joke, a cruel joke on the backs of hardworking Australians who have seen their savings lost. (Time expired)

Question agreed to.