Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Competition Policy and Consumer Affairs) Share this | Hansard source

Those changes also had nothing to do with the advice that people were provided—as my twin brother and my friend and colleague interjects, and I thank him for that interjection—nothing to do with the quality of the advice. If you are going to handle or address these public policy concerns in a sober, evidence based way you should actually look at what the causal factors are of the hardship that you are hoping to avoid—what is the evil you are hoping to address? To understand what has caused it then gives you an insight into what action you might need to take.

This whole package is free of that analysis and instead we see some propositions that the government cannot even defend themselves because they are so incoherent. The coalition again puts forward the framework that was agreed through the Parliamentary Joint Committee on Corporations and Financial Services which said these things should not go ahead in their current form. It said that they lacked some key characteristics that would represent a positive step forward for the industry and for the investors that rely upon the advice that they are given. They represent a great deal of red tape and compliance imposition for no good reason.

I recall my travels to Gladstone. I had a nice flight up there to meet with all the financial advisers in Gladstone. There is a community providing quality financial advice to a number of people not only to the immediate Gladstone community but to quite a lot of fly-in fly-out people and other people earning quite staggering incomes in the mining sector. So the quality of their advice is very important in setting up those people for their future. They all came to me and said, 'Bruce, this opt-in idea: where on earth did that come from?' I was able to point to the industry superannuation funds. The collective groan in the room said to me: 'Well, that'd be right. Here's another regulatory and red tape imposition championed by a very narrow section of the financial services sector to advantage its own interests.' They described to me the example of someone who had been out on a mine for three or four weeks and would fly into Gladstone. They had some time to themselves or they might want to catch up with family and friends. They walk into their place of accommodation and find a mountain of mail you could not climb over. They described to me the things that person would be looking for. Imagine that you are that person: would you be looking for the bills you have to pay? Probably, so you can make sure the phone was not cut off and the power was there. You might look for one that has a sweet scent; that one might be a note from your sweetheart. But if you saw something from your financial adviser, would you know what it was? Given the relationship you have with your financial adviser, who is servicing your interests well in an open and transparent way, you might think this was probably another newsletter with the latest update on what the government is mangling in another area of the policy. That could be it, and you would probably think: 'Gee, I see enough of this dysfunctional and divided government. I'm back and I don't want to be depressed even more about government incompetence affecting my interest and the national interest.' So you put that to one side.

You might then have a lovely few days in Gladstone: you might do some fishing or you might catch up with your sweetheart. You might just go about your life and then fly out again without looking at the letter from your financial adviser. Under these changes, that would be: uh-oh, end of relationship, because you have not opted in again. You have not opted in again because you were bewildered by the burden imposed on you and your financial adviser, even though your relationship has served you well, is open and transparent on fees, the quality of advice and the frequency of engagement and makes sure that your interests as an investor align with the advice being provided by your adviser. Then suddenly, because you have not sorted out some bureaucratic renewal within a 30-day period, the relationship is over. What happens then? What happens with the advice that you hoped you might get while you are out at the mine site? What happens with your investments? This is just one very practical example where this is likely, according to some in the industry sector, to cost $120 per client. It will eat away at their investment nest egg for no good reason and to no demonstrable benefit.

If you look at other areas you will see that certain products with trailing fees and the like—even where they were entered into with full knowledge by the parties involved—will be prohibited under these changes. What will you do? You will have to change them, get out of them or have those arrangements restructured. I read an impassioned plea from a small business financial adviser who points out that not only is he 'being branded a hellraiser out to pillage their clientele because of events involving Storm and Opes Prime over which they had no influence whatsoever', he is 'somehow being victimised and used as a scapegoat for consequences that weren't any of their making'. That is how he starts his presentation to me, and I think he is right on the money. He goes on to talk about what would happen with the trusted relationship he has where, as the shadow Treasurer pointed out—the key tenet is 'no surprises', is how I would characterise it—the advisers are acting in the best interests of the client, there is transparency in the fees, there is an understanding of what support is being provided for those fees and the client can opt out whenever they choose. They can just go if they are not happy. What is wrong with that? Instead we have this very odd set of recommendations.

We also have an example where the government is failing to address the impact not only on small financial advice businesses, but also on consumers. On the trail ban that is being proposed: what happens if you have a client who is in such a product but now cannot be? You will have to go to that client and say, 'I'm sorry, even though you fully understood what you entered into and what the cost structures are, even though the product may be performing very well for you and regardless of what any industry superannuation fund advocate may be stating, you have to hop out of it.' What is the cost of exiting that product, of having it restructured or of trying to materialise the asset value, which you know has taken a hit through the GFC? You would do your money. So in this example, the recalibration that will be needed if you are a Centrelink client, the risk to your capital of materialising a gain or loss, the fact that there may be costs involved in shifting into another product, all seem to have not been taken into account by the government. This is why these bills should not proceed. The industry is not supportive of them and most fair-minded people looking at the measures cannot see a connection between then and what the government proclaims it is trying to do. The lead-up time frame is too short, there are too many uncertainties about the detail of these reforms and the financial services industry is wary of the government that has blamed them for plenty, even though it has not been their responsibility. They deserve to be taken more seriously. (Time expired)

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