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

I move:

That this bill be now read a second time.

I seek leave to table an explanatory memorandum relating to the bill.

Leave granted.

I table the explanatory memorandum and I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

According to the Australia Securities and Investment Commission (ASIC), in a report released in 2010, between 60-80% of Australian adults have never used a financial planner. The report also asserted that the people that could benefit the most from financial advice are younger people and those with less wealth or income, however these are the two cohorts that seek financial advice the least.

There is little doubt that accessibility to financial advice and improved financial literacy would help a large number of Australians better manage their finances. However the cloud that hangs over the financial advice industry as a result of scandals and cover-ups is a large contributor to why financial advice is underutilised.

Over the last decade events such as the collapse of Storm Financial and managed investment schemes such as Timbercorp burnt many retail investors who sought out and received financial advice. The recent Senate Economics Committee inquiry into the activities of the Australian Securities and Investment Commission led to the presentation of compelling evidence and widespread publicity of the fraudulent activities that went on in the Commonwealth Bank subsidiary Commonwealth Financial Planning. Macquarie Wealth was also implicated by the Senate inquiry.

It is unsurprising that Australians are hesitant in seeking financial advice following these types of revelations. This is to the detriment of the vast majority of independent financial planners who are responsible and demonstrate professional conduct.

The current Government has also made it clear that they are more interested in protecting the financial services industry, especially the large banks which dominate the industry, rather than consumers. They are unwilling to ensure past incidences of wrongdoing are appropriately investigated and that the perpetrators are prosecuted. The ASIC inquiry recommended a Royal Commission into the activities of the Commonwealth Bank. Even with their penchant for Royal Commissions (Pink batts and Unions) the Government was pretty clear that they wouldn't be exposing the big end of town to proper investigation.

They are also unwilling to accept that the legislation and structures that govern the industry need changing. Their determination to unwind the previous government's future of financial advice reforms to the detriment of the consumer clearly demonstrated this. A coalition of consumer organisation including CHOICE and Seniors Australia united in their concern at the Government's actions.

It was extremely disappointing to see the Palmer United Party join the Government in the Senate to ensure the changes to the future of financial advice reforms were enacted through regulation. I hope the Palmer United Party takes a good look at the legislation when it arrives in the Senate and vote against the legislation to ensure consumers are protected.

This Bill is a small step in reforming the legislation that governs the industry by providing consumers with a clear differentiation between personal and general advice. It is a direction explored by David Murray in his Financial Systems Inquiry interim report. Surprisingly it is also a position that the Commonwealth Bank has recently advocated for. Media reports on August 29 indicated that the Commonwealth Bank thought renaming 'general advice' sales is a positive move forward.

I welcome the recognition by David Murray and the Commonwealth Bank that changes are needed in terminology.

A slight definitional change is an important first step in amending the Corporations Act to help improve consumer information. Under the Corporations Act 2001, financial product advice falls under two categories, personal advice or general advice. According to the Corporations Act 2001 Section 766B:

"personal advice is financial product advice that is given or directed to a person (including by electronic means) in circumstances where:

(a) the provider of the advice has considered one or more of the person's objectives, financial situation and needs (otherwise than for the purposes of compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 or with regulations, or AML/CTF Rules, under that Act); or

(b) a reasonable person might expect the provider to have considered one or more of those matters."

The term advice when it is used in reference to 'general advice' is misleading. Under the current legislation 'advice' is provided when, for example, a bank teller provides a customer with information about insurance. The aim of this Bill is to make it clear that when this insurance information is provided it is not advice based on any personal circumstances but is information provided by the teller because they are interested in selling a product. The term advice implies something beyond information. In terms of general advice for financial products this is not the case and therefore the Bill's purpose is to clear up the misconception.

The current government talks about our ageing population and the burden this may place on budgets in the coming years while undermining consumer protections in favour of their mates in the banking and big end of the financial services industry, many who have the vertically integrated business models that pose a systemic risk. This sends the wrong signals by locking in the mistakes of the past. This also means people will potentially continue to refuse to obtain the advice and information that they need to plan for the risks they face over their lifetimes and into retirement.

This Bill presents a straightforward change that the Parliament should adopt. The Government should heed the work done by the Financial Systems Inquiry, an inquiry they commissioned themselves. David Murray asserts in his interim report that:

"Consumers should have confidence and trust in the financial system and be able to expect fair treatment. Effective regulation that minimises misconduct and promotes fair outcomes will drive confidence and trust in the financial system."

It is clear that the Government has no interest in improving the financial services industry and the protection of consumers if it threatens the profits of the large banks and financial services companies. Evidence provided by the recent Senate Inquiry into the repeal of the Future of Financial Advice reforms demonstrated this.

The Greens are eagerly anticipating the final report of the Financial Systems Inquiry particularly in regards to consumer protections. I look forward to working with the industry and consumer groups to make real structural changes.

I again call on the Government to represent the consumers rather than the big end of town. There is a lot to do to improve the reputation of the industry and the protection of consumers. This Bill is just the start. There are many structural issues to tackle to ensure that consumers are protected from another ‘Storm Financial’ or fraudulent behaviour through a financial services company.

An improved financial advice system that is reliable and trusted benefits the industry itself, the consumer and the country as a whole.

I seek leave to continue my remarks later.

Leave granted; debate adjourned.