Pauline Hanson (Queensland, Pauline Hanson's One Nation Party) Share this | Link to this | Hansard source

[by video link] I rise to speak on the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Bill 2021. The primary purpose of the Hayne royal commission was to look at the banks, but a considerable part of its focus ended up squarely on the financial advisory sector. With this legislation, the government seeks to place more responsibility and liability on financial advisory services, while, under the government's national consumer credit legislation schedule 1, the banks would have absolutely no responsibility if the government amendments were to proceed. Is it because the banks make large donations to the major political parties that they are being protected? I'm only thinking out loud.

I have made it clear to both the government and the public at large that I would never support legislation that would absolve the banks of any responsibility for their actions. And yet here we have the government, under this bill, imposing strict liability clauses while waiving the normal standard of the presumption of innocence. While I agree with the scope of this bill, it should be amended to remove strict liability clauses so the presumption of innocence is maintained, as recommended by the Standing Committee on the Scrutiny of Bills in its inquiry. Furthermore, the strict liability imposes a reversal of the onus of proof for offences which are minor in comparison to what all Australians have witnessed with breaches of responsibility by Australians banks. Surely all senators must see the contradiction between these bills and the disparity of the liability on both sectors.

Presumption of innocence is one of the essential foundations of a fair judiciary in a representative democracy. Strict liability would essentially place the onus of proof on the defendant, effectively presuming guilt. Despite the committee's recommendation, all of its members in this chamber are not acting to implement it. They're not acting on their own recommendations! It doesn't make sense. It isn't remotely logical. Such is the nature of politics in this place and the reason that public trust in the financial sector and government is abysmally low or non-existent.

One Nation also called on the government for the insertion of a clause for requiring that the one-size-fits-all course for financial advisers and stockbrokers provided by the Financial Adviser Standards and Ethics Authority be varied to ensure they cater for these two very different disciplines. Therefore, I would now call on the government to ensure that ASIC, as the responsible authority, addresses this disparity in its regulations currently released for comment. There should be separate courses ensuring those who undertake them are suitably qualified for these different roles. It's just not fit for purpose when a stockbroker is being tested on providing advice about social services, as an example.

In considering this legislation, I think it's important to highlight some of the findings of the royal commission. These findings confirmed what many Australians already knew: quite a few financial advisers were in it for themselves and certainly not in it for anyone else. As the old saying goes: 'If you can't be part of the solution, at least you can still make a lot of money by being part of the problem!' That's why the findings were not at all surprising to the many Australians sacrificed on the altar of profit.

Firstly, the royal commission observed that, in almost every case it examined, the conduct in question was primarily driven by individuals' pursuit of gain. Sales became all important. Those who dealt with customers became sellers. And the confusion of roles extended well beyond frontline service staff: advisers became sellers, and sellers became advisers. Service to customers took second place.

Secondly, entities and individuals acted this way because they could. Consumers had little in the way of informed choice, and this created a very uneven playing field.

Thirdly, consumers often dealt with the financial services entity through the intermediary. They would, understandably, believe that that intermediary was acting in their interests, when all too often intermediaries were paid to act in the interest of the provider of the service or product. Legislation requires these conflicts of interests to be managed, but all too often they were resolved in favour of the provider. As the final report noted:

An intermediary who seeks to 'stand in more than one canoe' cannot.

Finally, the royal commission observed that, too often, financial services entities that broke the law were not properly held to account. It stated:

Misconduct will be deterred only if entities believe that misconduct will be detected, denounced and justly punished. Misconduct … that yields profit, is not deterred by requiring those who are found to have done wrong to do no more than pay compensation. And wrongdoing is not denounced by issuing a media release.

I think the final report nailed it when it said:

The Australian community expects, and is entitled to expect, that if an entity breaks the law and causes damage to customers, it will compensate those affected customers. But the community also expects that financial services entities that break the law will be held to account. The community recognises, and the community expects its regulators to recognise, that these are two different steps: having a wrongdoer compensate those harmed is one thing; holding wrongdoers to account is another.

Senators will ignore this message only at great peril.

This legislation attempts to implement the government's response to recommendation 2.10 of the royal commission to establish a new disciplinary system for financial advisers and provide for a single central disciplinary body. The government says this will involve expanding the Financial Services and Credit Panel within the Australian Securities and Investments Commission to operate as the single body and ensure less serious misconduct doesn't go unaddressed; creating new penalties and sanctions; introducing a new registration system to improve transparency and accountability; and transferring functions from the Financial Advisers Standards and Ethics Authority to the minister and ASIC.

With the amendments I have outlined, One Nation is prepared to support the legislation. Financial sector reform is absolutely critical to meet the community's expectations. This government must ensure accountability and transparency in the financial services sector; equally, it should do so in the banking sector. It's not only in the interests of everyday Australians but in the interests of the financial sector itself. I call on senators to seriously consider supporting my amendments to make this a better piece of legislation.

Tony Sheldon (NSW, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Bill 2021. The bill implements recommendation 2.10 of the Hayne royal commission, which recommended that a single disciplinary body be established for financial advisers. Labor supports this bill.

This bill has been reviewed by the Senate Economics Legislation Committee, and I support the comments made by Senators Chisholm and Walsh in the committee's report which call on the government to strongly consider the views of consumer advocates and 'consider appointing representatives with appropriate consumer experience and sectoral knowledge to the Financial Services and Credit Panel'. But of course Labor still does support this bill. Indeed, Labor have been very clear that we seek to rapidly progress any legislation that appropriately implements the findings of the Hayne royal commission.

Unfortunately, this enthusiasm has not been shared by the Morrison government. The Prime Minister infamously voted against a royal commission into the banks 26 times—26 times! Now, we know the Prime Minister hates nothing more than being held accountable for his decisions, and he was determined to extend the same courtesy to the big banks. The royal commission found these same banks to have engaged in shocking behaviour. They were ripping off and rorting thousands of Australians. Some of the rorting would almost make the Morrison government blush—almost. This is how widespread the rot is in the financial services sector, and the Prime Minister voted against a royal commission into that industry 26 times, on 26 separate occasions.

It's very fortunate for the thousands of the victims of this financial exploitation around Australia that Labor and the crossbench were so determined to bring the royal commission about. While we were pushing for a royal commission, Mr Morrison was going on television and saying, 'It's nothing more than a populist whinge.' In another interview he called it 'a reckless distraction'. That is very strong language from the Prime Minister. I have never heard him use that sort of language to support hardworking Australians when they're under attack, such as the 2,000 workers whose jobs were outsourced by Qantas last year—this was while Qantas was receiving $2 billion in taxpayers' money from the Prime Minister to keep them employed. The Prime Minister hasn't lifted a finger to support them, even after they won their landmark case against Qantas in the Federal Court earlier this year. And even though many of those Qantas workers live in his own electorate of Cook, it really goes to show what side the Prime Minister is on. If you're an outsourced Qantas worker, you get nothing from Mr Morrison. You don't even get access to the latest aviation support the government has announced. That only goes to direct airline employees. But if you're the CEO of the Commonwealth Bank, you're in luck. Mr Morrison will go in to bat for you.

Let's remind Mr Morrison about what the royal commission actually discovered was happening in the financial services sector. Here is what the 'populist whinge', as Mr Morrison referred to it, actually revealed. The corporate regulator, ASIC, revealed 90 per cent of financial advisers who provided advice to self-managed superannuation funds had failed to comply with the best interests of their clients—90 per cent.

Some of largest companies in Australia—the Commonwealth Bank, NAB, AMP and Westpac—had continued to charge clients for advice and life insurance after they had died. AMP alone admitted to continuing to charge life insurance premiums to more than 4,600 of their dead customers. There were widespread reports of fees for no service not just to the dead but also to the living. The big banks were forced to pay over $1.2 billion in compensation for fees for no service.

The commission heard that the NAB's Introducer Payments Program had paid exorbitant sums of money to accountants, tailors and gym owners to push their clients into unsuitable home loans. One introducer, who worked as a tailor, had successfully pushed his clients into $122 million worth of home loans, and reaped $488,000 in fees.

The Commonwealth Bank admitted to offering repeated credit card limit increases to a customer who was begging them to stop because he had a gambling addiction and was already $30,000 in debt. The Commonwealth Bank also admitted to selling credit card insurance to 60,000 ineligible unemployed customers.

Insurance giant Allianz admitted it sold junk insurance to 68,000 Australians. That is insurance that provided little or no actual benefit. Now, Allianz wasn't alone. IAG also sold junk insurance to 68,000 people. Suncorp sold junk insurance to more than 41,000 people. And QBE sold junk insurance to more than 35,000 people. One of the biggest life insurance companies in Australia, TAL, abruptly stopped paying insurance to a woman with cervical cancer because TAL discovered she had sought help for completely unrelated mental health issues years before her cancer diagnosis. ASX-listed Freedom Insurance was exposed for cold-calling a 26-year-old man with Down syndrome and selling him more than $100,000 in life insurance. When the man's father complained, Freedom's staff ridiculed him and called him a whinger. That same company was also exposed as having tried to hang on to customers when they tried to cancel insurance policies.

The commission heard about how banks have ripped off small businesses, particularly in regional Australia. ANZ threatened one farming couple with bankruptcy if they didn't sell their sheep, farm and home to come up with $300,000 within just eight days. The commission heard about the disgraceful exploitation of Indigenous Australians by funeral insurance companies. Some families were paying for four or five different funeral insurance policies at a time without their consent or knowledge. These are just a few of the disgraceful stories that came to light through the banking royal commission, the commission Mr Morrison voted against 26 times.

The Morrison government could have redeemed itself by quickly implementing the commissioner's 76 recommendations, but, 2½ years after that final report was handed down, just 27 of the 76 recommendations have been implemented. That is just 36 per cent. That is a failing grade in any marking system. If the Morrison government were implementing the royal commission recommendations any slower, you could mistake it for their vaccine rollout.

If you open up Commissioner Hayne's report and start counting through the recommendations, it doesn't take long to find where the Morrison government lost interest: recommendation 1.1, literally the first recommendation, the most basic and fundamental recommendation to come out of the royal commission. Recommendation 1.1 said that the government should not water down responsible lending obligations on the banks, and what has the government done? It has introduced a bill to do exactly that, the National Consumer Credit Protection Amendment (Supporting Economic Recovery) Bill 2020, which has already passed through the House. It has been lingering on the Senate Notice Paper for months like a bad smell.

When the government issued its official response to the royal commission, the Treasurer said:

… we committed to taking action on all 76 Royal Commission recommendations and, in a number of important areas, going further.

The Treasurer's press release went on to say:

That deadline was 10 months ago, and we've barely scratched the surface. The truth is that the government never had any intention of implementing most of these recommendations. We know Mr Morrison did not want this royal commission, because he voted against it 26 times, and we know now that Mr Morrison did not want to implement its recommendations.

But why does Morrison not want to hold the banks to account? Firstly, because, if Mr Morrison began holding the banks accountable for their actions, where would it end? The Prime Minister would risk creating an expectation that the rich and powerful in Australia can be held to account, and that would end up coming right back to Mr Morrison's own door.

There's another reason why the Morrison government won't hold the banks to account: it's because the Morrison government is so close to the big bank lobbyists that one of those lobbyists was even elected to the Senate: the senator for the Financial Services Council, Senator Bragg. Senator Bragg worked at the lobbying group for the financial services industry, the Financial Services Council, for eight years, from 2009 to 2017. While Mr Morrison was voting against the royal commission and calling it a populist whinge in August 2016, Senator Bragg was working as director of policy for the Financial Services Council, and now they are in government together. The foxes are well and truly in the henhouse.

The only part of the financial services sector that we know the Morrison government is interested in fighting is industry super funds, which happen to be one part of the financial services sector that came out of the royal commission with reputation largely intact. Industry super funds return all profits to their members. They perform better on average. They have lower fees. They have not engaged in the sort of disgraceful conduct uncovered by the royal commission. And yet time and time again the government introduces bills to try and lure more unsuspecting Australians into the retail super shark tank. The government uses none other than the Financial Services Council lobbyist himself, Senator Bragg. When trust in democracy and trust in parliament is at an all-time low in Australia, this really sums it all up. Who is the chief attack dog on industry super? Senator Bragg. We have a government that never wanted a royal commission into misconduct by the most powerful companies in Australia, the big banks. When they were finally forced into setting it up, they pretended to accept all the recommendations and only actually implemented 36 per cent of them. Then, to cover this all up, they brought the lobbyist for those financial institutions, Senator Bragg, into the Senate. Then the government used Senator Bragg to attack the one part of the financial services sector that was shown to be doing the right thing: industry super funds.

In August the government quietly dropped new regulations to mislead more Australians into higher-fee retail funds. According to these new regulations, super funds will only be assessed on the administration fee they charged in the most recent financial year. The performance test was originally based on the average fee charged over the past eight years. This is an absolute joke. The new performance testing laws were passed through the Senate only a few months ago, and in the space of a month the government passed a regulation to completely change how the performance testing is conducted. Because the testing ignores the fees that high-fee retail funds have charged over the last eight years, retail funds will be able to misrepresent the returns they have delivered. The government knows this is a complete misrepresentation. That's why they didn't include it in the legislation that was passed in parliament. They waited a few weeks and snuck it into regulations instead.

This government is not on the side of any Australian seeking the best returns for their super money. This government is not on the side of any Australian who wants a fair and equitable relationship with their bank. This is a government which hires bank lobbyists as senators and voted 26 times against a royal commission. Setting aside for a moment the 49 royal commission recommendations which are being left to wither and die on the vine, Labor supports this bill. This bill unfortunately implements just one recommendation of the royal commission. It's a shame it has taken so long and this is just one of the many overdue recommendations.

I also note and support Senator Gallagher's amendment that the Senate note the government's failure to act on the recommendations more broadly and Senator Patrick's amendment to require the government to show the Senate its draft regulations before this bill is passed. We have already seen, with the Your Future, Your Super laws, that this government will sneak in despicable regulations whenever it can. I urge the Morrison government to stand up and hold the hose this time and clean up the banking and financial services sector, not continue to lie doggo on it.

Rex Patrick (SA, Independent) Share this | Link to this | Hansard source

I rise to make a brief contribution on the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Bill 2021. I indicate to the chamber that I won't be moving my second reading amendment. The purpose of the second reading amendment was to refer the bill back to committee because the regulations had not been tabled. They have now been made available. I just want to say thank you to the Senate for standing up. The Senate indicated, through the whips system—or at least through the system that we all know takes place in the back rooms of this building to indicate whether or not there is support for an amendment such as the one that I was planning to move—that I had the numbers. The government knew that and then dropped the bill from the list, went away and produced the regulations. My office has now had some further consultation with the industry and with Senator Hume's office. There's been a little bit of argy-bargy, and there are some things I would like to have changed further. I accept I don't have the numbers on those, so, ultimately, I will support the bill. It's not perfect, but I won't let that be the enemy of the good.

In general, I would like to say thank you to the Senate. When I made my dissenting report to the committee, it was based on the principle that the first provision in our Constitution is that it is the responsibility of the parliament to make the laws. Whilst regulations have a place, it is not proper for someone to walk into this chamber and thump down half a law, to provide only half the picture, because often the devil is in the detail of the regulations. By indicating support for my second reading amendment, the Senate has forced the government to do the right thing. That is a good thing. I might just encourage senators: that probably sends a signal to the government for all future bills that the Senate is at least willing to delay things until such time as the regulations are tabled with the bill.

My advisers have now been forewarned that if the regulations aren't tabled with a bill I will automatically move a similar second reading amendment, and the minister will have to take a pot shot as to whether or not the bill will progress through the chamber. That's a really, really good thing. I would ask that senators consider this in relation to things like referrals to the Privileges Committee, the insistence upon compliance with orders of the Senate and the proper answering of questions by officials before the Senate.

We're in the unique situation of having the Australian public as our boss. We're at the very, very top of the chain. Unlike other bodies, where there's someone looking over and saying, 'No, you've got to do things in a particular way,' it's up to us. If we stand firm on things, then we will get much, much better process occurring. If we stand firm on things, we'll get much better answers. So I'm hopeful that, when the Privileges Committee considers some of the matters that are before it, it will recognise that when the Senate stands together we can actually change the way in which others treat us in this building, and if we don't stand together, if we don't stand up, make a point and take a stand, then we leave ourselves at the mercy of poor process and poor answers, and that doesn't help us with our oversight.

Thank you, Minister, for tabling the regulations. I will be supporting the bill.

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

Marielle Smith (SA, Australian Labor Party) Share this | Link to this | Hansard source

[by video link] I also rise today to make a short contribution on the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Bill 2021. Before I begin, I want to associate myself with the remarks of Senator O'Neill and acknowledge Senator O'Neill's incredible advocacy and thoughtful work in this area. She has been a true champion of reform here. Few people understand the details better than Senator O'Neill.

The Hayne royal commission made it absolutely clear that the Australian financial industry, on too many occasions, had failed to adequately serve its customers and, in far too many cases, operated against the best interests of customers. The royal commission rocked Australia, as we knew it would; that's why we called for it. We knew how critical it was that a royal commission investigated these issues.

We knew that consumers and businesses were being impacted by the unscrupulous conduct of actors in this space. They were telling the government this loudly and clearly, and the government ignored them. They voted against establishing a royal commission 26 times. They only capitulated because of pressure from their own backbench, but they voted against this 26 times. We saw dud efforts at reform which didn't work, as they tried to protect an industry which desperately needed scrutiny from that scrutiny.

It's been nearly three years now since Commissioner Hayne handed down his report to the government. Frustratingly, the response has been on the 'go-slow'. We are still dealing with legislation to deal with individual recommendations contained in this report. Indeed, as Senator Sheldon said, this bill deals with just one. It is classic Prime Minister Morrison: too little, too late. He was dragged there too late because he did not care. He did not care—26 times voting against this. The government put protecting Australian consumers on the backburner and dithered in implementing these reforms, just like they dithered in having the royal commission.

Failing to tackle these reforms head-on and urgently has real-world consequences for families. This kind of acting in this space, these behaviours, when families were being ripped off by financial advisers and institutions, tears apart lives. It takes homes away, it takes futures away and it crushes dignity and security in retirement when institutions fail to act in the best interests of their customers. And the consequences are devastating, not just for individual consumers but for businesses—small and medium enterprises who take on risk based on advice, who rely on this advice, who rely on honesty and accuracy in their dealings with these institutions. When these interests aren't protected and those businesses fail, of course it's not just the operators of these businesses who suffer but also the employees who work in them, the employees who rely on these businesses to be successful, because that's how they get their job, that's how they pick up their pay packet at the end of the week as well.

We believe that Australian families and businesses should be able to access financial services and advice confident that the law protects them from being taken for granted by bad actors. We knew this was happening for a long time—that's why we needed the royal commission, that's why we called for it and that's why we fought for it.

I will make the point here that good financial advice really matters. Good financial advice for families can be the difference on delivering their aspirations to them or not. It can be the difference of delivering financial security and the different in delivering dignity and security in retirement or not. It can be the difference between a family being able to own their own home or not. Advice needs to be high quality, it needs to be accessible and it needs to be affordable, and this is the challenge for government, for regulators, so we don't have a situation, which we have seen, where customers are getting costed out of getting advice, costed out of the support they need.

To those in the industry struggling, as Senator O'Neill acknowledged, I want to acknowledge you too—I want to acknowledge the impacts of this government's delay and dithering and dud efforts of reform on your industry and on your work. Those experienced financial advisers who we know do the right thing by their clients deserve clarity, not uncertainty and not unnecessary costs. We need to get this right. We need to get it right for consumers, we need to get it right for those people who have suffered at the hands of unscrupulous actors, we need to get it right for industry. To make sure that it's working, we need regulation that is fit for purpose and that gets this balance right.

The Prime Minister, Scott Morrison, has always—always!—stumped up with too little, too late. We've seen it in the pandemic response, we've seen it on climate change, we've seen it on aged care, we've seen it on early education and care, and we see it crystal clear on this important area of financial sector reform. Never forget he voted against this royal commission 26 times—this critical work which exposed horrific stories from consumers and businesses.

I am pleased that this legislation deals with one of those recommendations. It goes part of the way to getting there, but there is more we need to do to be supporting this sector and to be supporting Australian consumers to make sure that there's a genuine listening to the calls of those who presented to the royal commission, those who have suffered. This is urgent reform work, and please get on with it.

Louise Pratt (WA, Australian Labor Party, Shadow Assistant Minister for Manufacturing) Share this | Link to 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.

Jane Hume (Victoria, Liberal Party, Minister for Superannuation, Financial Services and the Digital Economy) Share this | Link to this | Hansard source

I thank those senators who have contributed to this debate, although many of those opposite have demonstrated a profound ignorance or wilful disregard of this important industry—crocodile tears and, within the same breath, a call for even more regulation. They have conflated unadvised product failure with financial advice. The disrespect—indeed contempt—those opposite have for the financial advice industry can be no better demonstrated than when, as recently as June, in this very chamber, Labor senator Jenny McAllister labelled financial advisers as shonks. She said the people who would benefit most from these arrangements are financial advisers giving shonky advice—the kind of advice we have seen again and again, the kind of advice exposed in the Hayne royal commission. The Australian Association of Financial Advisers said these comments were unfair, unreasonable and doing much damage to the financial advice profession. Enough is enough, and it must stop.

The Morrison government is focused on cutting red tape, cutting regulatory alignment, creating regulatory alignment and reducing costs for financial advisers and financial advice businesses, which is exactly what the industry has called for. This is the very best way to ensure that Australians can continue to access high-quality, professional and affordable financial advice. This bill is simply one piece of that puzzle.

The Morrison government is also committed to implementing its response to the financial services royal commission and is delivering one of its commitments through this legislation. The Hayne royal commission had 76 recommendations for reform. Fifty-four of those were directed to government. This is No. 53, and the final recommendation will be delivered in the form of legislation imminently. The remaining recommendations were to regulators and 10 were to the industry, which I think is worth pointing out to Senator Sheldon.

This bill implements recommendation 2.10, which recommends the establishment of a single disciplinary body for financial advisers and that all financial advisers who provide personal financial advice to retail clients be registered. The bill expands the role of the Financial Services and Credit Panel within ASIC to take on the role of a single disciplinary body and gives the panel new sanctions powers. The bill also seeks to streamline the number of bodies involved in the oversight of financial advisers by transferring the functions currently undertaken by the Financial Adviser Standards and Ethics Authority to the minister responsible for the Corporations Act 2001 and to ASIC. Finally, the bill provides that tax financial advisers will no longer be regulated by the Tax Practitioners Board and instead will be regulated only under the Corporations Act 2001. This is consistent with recommendation 7.1 from the independent review of the Tax Practitioners Broad.

This bill reaffirms this government's support for the advice industry, building on measures such as the temporary and targeted relief for financial advisers by reducing the cost recovery levies charged by ASIC for the 2020-21 and 2021-22 financial years. This relief will see ASIC levies charged for personal advice to retail clients restored to their 2018-19 level of $1,142 per adviser for the next two years. This relief will represent a 63 per cent reduction relative to the level estimated in ASIC's 2020-21 cost recovery implementation standard of $3,138 per adviser. So this means that advice businesses will save around $1,996 per adviser per year.

This government recognises that, during the worse days of the pandemic, thousands of Australians turned to their financial advisers and that, for so many Australians, considered advice from a professional and experienced adviser was what helped them through the worst of the COVID induced recession. Ensuring that Australians can continue to access high-quality professional and affordable financial advice is incredibly important as we emerge from the pandemic, and I commend this bill to the Senate.

Slade Brockman (WA, Liberal Party) Share this | Link to this | Hansard source

The question before the chair is that the second reading amendment moved by Senator Gallagher be agreed to.