Steven Ciobo (Moncrieff, Liberal Party) Share this | Hansard source

I rise to speak on the Corporations Amendment (Future of Financial Advice) Bill and the Corporations Amendment (Further Future of Financial Advice Measures) Bill of 2011. These are important bills because they go to an issue that affects the community at large: the ability of people to provide for their retirement.

There is no doubt that one of the principal channels that enable people to provide for their retirement is well-informed advice over a long time about what they should be doing with their money to best equip them to live as comfortably as possible for as long as possible. In that respect, financial advice and the responsibility that financial planners have to their clients is tantamount. Good government policy should create an environment that maximises the opportunity for people to obtain good advice and that ensures there is in place a legislative framework with appropriate safeguards to ensure that consumers—the clients of financial planners—are not adversely affected by, for example, conflicted remuneration.

In this respect I think it is important to deal with the fact that historically in large this has been an issue with in many respects bipartisan support, with the bona fides of all sides of government and opposition to deal with the issue. In 2011 the former coalition government made a whole host of reforms with respect to financial planners and financial advice.

I had the good fortune, as a very new member, of sitting on the Joint Standing Committee on Corporations and Financial Services in the latter stages of that round of reforms, and hearing from an array of different stakeholders in the industry who provided their input about the reforms that the coalition was undertaking then.

There has, of course, been much water under the bridge since then. One of the biggest issues that have afflicted the world since then is what is referred to as the global financial crisis, the GFC. There is no doubt that the GFC shook to their core very many people in Australia—literally millions—and around the world hundreds of millions of people, if not billions, who thought they were approaching an age when they would be well equipped and well established to live a life in retirement drawing down on the funds that they had set aside for exactly that purpose.

The GFC has seen significant erosion in asset values and in returns from financial investments. This has raised the level of anxiety, not only in the Australian community but globally, among people who thought that they were well equipped for their retirement but now find themselves hundreds of thousands of dollars short. This is coupled at the same time with a very real erosion of government ability to provide pensions to what is a growing, ageing population.

These two events have culminated, effectively reaching a crisis point in many countries, where there is an inability of the state on the one hand to provide for their citizens in a way that many citizens thought they would be and on the other hand an erosion of the very real balance that people had provided for their retirement. At that point it is little wonder that there has been a very high level of scrutiny on the financial planners who are working in the community and who are ideally partnering with their clients as they undertake life's journey by providing for their retirement funds.

Mindful that that is the context in which the community finds itself looking at the issue of the advice provided by financial planners and mindful that there is a requirement for financial planners to provide good advice—not conflicted advice, but bona fide advice—that does ensure that the clients' needs are met by the investment protocol that they take, there has been a further round of analyses, examinations and now recommendations to ensure that financial planners do the best things by their client.

In 2009 the member for Oxley, Bernie Ripoll, undertook as chair of the Joint Committee on Corporations and Financial Services an inquiry into what was happening in financial planning. It was commonly referred to as the Ripoll inquiry and it looked very closely at all the issues that I have just touched upon. It examined the best legislative way to ensure that clients had the best opportunity to match their investment profile with their particular needs. Obviously the needs of someone who is 55 years of age, has a paid down mortgage and has adult children who have left home would be radically different to a person who is 25 years of age and maybe recently married—someone who is at the very beginning of the journey of paying down their mortgage and someone who might be expecting to have children in the foreseeable future. The needs of both of those clients are very different stages of their lives, but ultimately they culminate at the point where they are hoping to be in a position at their retirement where they can live a comfortable and well-funded existence, one that ideally does not need to draw upon taxpayer support and one that ensures that those people can have an adequate retirement they are comfortable with.

Mindful of those differences, it is crucial that financial planners know their clients and are in a position to provide advice that accord with their respective needs. The Ripoll inquiry looked at this in great detail. Importantly—and this is perhaps the most significant point—the inquiry found there was not a legislative lacuna; there was not a problem with the regulations and the legislative framework that applied to financial planners, where there were examples of failure of financial advice for clients. Rather the Ripoll inquiry found that the problem was that there were financial planners who operated outside of the legislative parameters and did not do the right thing by their client. There was not a problem with the legislation or the regulation, rather there was a problem with those operating outside it—in other words, the issue of enforcement. That is not to say that the system was perfect, but just to say that there was no glaring or obvious example of widespread failure in regulatory oversight.

That notwithstanding, the bills before us today attempt to address some perceived shortcoming in the financial legislation and regulatory oversight such that a raft of new regulatory burdens will be imposed on the financial planning industry at the behest of this particular government, at the behest of this particular Labor minister and on the basis of the arguments put forward—that is, it is in clients' interests. It is the coalition's view, and I certainly subscribe to this, that this is simply not the case.

The Ripoll inquiry, I would remind the chamber, was headed by a Labor member. The Labor member in that particular example did not find a massive shortcoming in regulatory oversight. One of the principal and most contentious initiatives that the Minister for Financial Services and Superannuation is undertaking is the decision, through legislation, to enshrine an opt-in provision. This is an example of massive regulatory overreach. This is an example of bad practice when it comes to red tape and additional compliance burden on the industry. Opt-in will require clients, on a regular basis, to opt back in to obtain financial advice. In other words, financial planners will be required to constantly go back to their clients to encourage or ask them to sign back on with them for a further period.

Where did this idea come from? We know that opt-in does not apply anywhere else in the world. We know that opt-in was not a recommendation of the Ripoll inquiry. Perhaps a bulk of submissions to the Ripoll inquiry said that opt-in would be one of the panaceas to ensure good financial advice. The reality is that that is simply not the case. Only one submission dealt with opt-in—and that was from the Industry Super Network. The Industry Super Network was the only group that called for opt-in. And, lo and behold, the minister for trade unions, the minister with a strong background—

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