Scott Morrison (Cook, Liberal Party, Shadow Minister for Immigration and Citizenship) Share this | Hansard source

I am pleased to speak on the Corporations Amendment (Future of Financial Advice) Bill 2011 and the cognate Corporations Amendment (Further Future of Financial Advice Measures) Bill 2011. I join with my colleagues in making it very clear that the coalition will not support the bill as it currently stands. My colleagues have gone into great detail as to the failings of this bill. Before I similarly do so, I think it is important to acknowledge what is really at the heart of these measures that are being put forward by the government.

The government and the Labor movement have always been interested in closed shops. The government have always sought to vilify those who have a difference of view—to vilify them in their statements, to demean their motives in the public view and to basically drive them out of being in any form in competition with their preferred business model. It is no surprise that the unofficial head of the union movement, the current minister responsible for industrial relations, decided—I suspect demanded—that he retain responsibility in his portfolio for these matters. There is an absolute, unequivocal linked agenda in the union motives of the Labor Party between superannuation and industrial relations more generally. This is an industrial issue for the union movement, being led by their key industrial advocate in this place, the Minister for Employment and Workplace Relations. This minister is pursuing the unions' agenda not only in his own portfolio of workplace relations but also in this matter, as he did previously when he was Assistant Treasurer.

The coalition has always seen through the government's motives. We have always seen what they are up to and I think the Australian public is also seeing this. What we are standing for here are some basic principles of choice, some basic issues of transparency and a lack of complexity which will enable Australians to make good choices and decisions about where they want to put their money for their retirement. We want to enable them to have the support and advice to do that in a way that helps them make those decisions, not to have the government impose those decisions on them by default and without any other alternative. Whether it is the government's decision to try to channel more money into industry funds, forcing businesses to pay for additional superannuation by increasing the levy, or whether it is at the other end by narrowing the funnel to ensure that all of those moneys flow into union-dominated funds, that is the agenda of this government. We need to bring that under the spotlight, it needs to be exposed and people need to know what the agenda is.

The package of future of financial advice bills before us today is yet another example of Labor's corner-cutting and heavy-handed regulation. The coalition will not support these bills in their current form. This legislation could be substantially improved if the government were to accept the coalition's amendments and were willing to listen. As the bills stand before us today the package is unnecessarily complicated and convoluted. At best, these bills are obstructive and unhelpful. At worst, they threaten jobs, businesses and consumer choice. The regulatory burden they seek to impose will not afford greater protection. All this legislation will do is tie businesses and consumers up in red tape, strangling competition and choice while driving up costs. It will upend the level playing field our financial advisers have previously had, tipping the balance in favour of a government-friendly business model: the union model. Financial advisers help hardworking people to better calculate and manage the risks they encounter and maximise their opportunities to provide for their own retirement. Advisers also play a very important role—as a business in my electorate has stressed to me—in helping the vulnerable, including the elderly and the ill, to make sound financial decisions.

I received a letter from a gentleman who lives in Sylvania Waters and works as a financial planner. He writes that 'our industry is based on trust and relationships—the trust is earned and then a relationship builds'. He makes the point that financial planners go above and beyond the call of duty to provide quality service and support to their customers, often investing additional hours of work that are not clocked. This is a fundamental issue that I think the government overlook. They overlook the bond of trust and the relationship and also the service that flows from that trust to the consumer. This is a value added service. It has a real value, it is valued in particular by those who demand it in their most significant time of need.

The financial advisers I know turn up for their clients and go above and beyond the call of duty, above considering any payment they may have ever received, to honour the commitment and trust they have formed in that very special relationship. That trust is tested at the most difficult and strenuous time in their clients' lives, whether it is through the loss of a lifetime partner, whether it is through some horrific event that has caused that loss or whether it is a debilitating and tragic illness or something of that nature. At your weakest time you need to rely on someone to look after you and your interests and to ensure that what you have invested in will be delivered to you. Your advocate in that case is not some backroom bureaucrat whom you do not know—thankfully, if you have a relationship such as this—but is the financial adviser who has advised you, supported you and counselled you in a decision and is there to turn up to be your advocate when things are really required.

I note the member for Forde at the table. In his professional life before coming to this place, I am sure the member for Forde could list any number of people—hundreds of people, if not more than that—with whom he has been able to establish that bond of trust. I know that is the same bond of trust that the member for Forde now has with his electors and constituents because he understands the issue of trust and I commend him for it.

One of the clients of the man from Sylvania Waters who wrote to me is a lady with advanced multiple sclerosis. She is fiercely independent and still lives on her own but has to budget carefully to meet the costs of medicines that are not covered in her treatment. Shrewd economic management is very important to enable this lady to maintain her independence. My constituent's financial advice assists her greatly in that capacity. He told me:

… the product will pay us—she can't afford to. We will be paid about $800. Currently I have spent six hours on this job and it will probably get to ten by the time I am finished—my accountant would charge $3000 for this job.

Of course, in these matters there are fundamental elements of trust involved. Advisers are paid to handle the hard-earned pennies of others and there must be transparency and accountability in all aspects of these processes. And it is critical that the industry continues to operate with a regulatory framework that is robust and accountable. But it is crucial that above all a level playing field is maintained for big and small businesses alike and for industry super funds and banks to ensure that competition can thrive, these important services can remain affordable and consumers can retain that all-important choice as to who they entrust with their money. I do not want to see the situation where someone who does not have the means to pay big fees upfront, to get the sort of advice they have been able to access for years, is denied that opportunity because of the passage of this bill. But I believe that will be the result. The bill before us today pretends to give consumers further protections by requiring advisers to act always in the best interests of their clients. Yet it falls short of achieving that very outcome. It is just another smokescreen for this government to cover yet another union agenda. Excessive red tape will only stifle business, driving up costs for operators, which will inevitably be passed on to customers. My constituent fears:

FoFA reform is going to sanitise our great industry. Australians are already under insured and FoFA in its current form will worsen that position and make the ever increasing social security burden even greater—

while at the same time, I note, driving up the value of the funds controlled by the unions. Another financial adviser in the shire agrees that without amendment:

FoFA will cause financial ruin to many advisers—

and individual Australians—

who have helped Australia survive to this point in tough global economic times, through their knowledge, skill and experience advising their clients to act rationally and not impetuously as the current Government has acted—

in the way it has spent taxpayers' dollars.

The dual goals of FoFA should be to improve transparency and improve access to advice for all. The bill before us will not achieve either. In 2009, the Ripoll inquiry was conducted in the wake of the collapse of Storm Financial, Westpoint and Trio to identify ways that risks could be better managed. At the heart of the Ripoll inquiry was the recommendation that a fiduciary duty be introduced to require advisers to place the interests of the client ahead of their own. However, the committee also noted that situations:

… where investors lose their entire savings because of poor financial advice are more often a problem of enforcing existing regulations, rather than being due to regulatory inadequacy.

The report sketched out a comprehensive blueprint to enhance our financial services and the frameworks that govern them, a plan the government could have adopted with bipartisan support. But, instead, decisions on important reforms have been delayed by more than two years and hijacked by the union-dominated industry super funds. My constituent complained that the FoFA consultation process has been influenced by 'powerful institutions who only worry about this year's profit and their bonus'. The government has held off on sensible reform to bluster on with contentious changes like the Industry Super Network opt-in proposal. This treading water has only produced profound confusion, uncertainty and upheaval for our financial services. At the end of two years in the wilderness, the government has presented a cobbled-together package that manages to be both unnecessarily complex and vague.

Evidence before the parliamentary joint committee inquiry into FoFA has confirmed the legislation in its current form will be detrimental to consumers, devastating for financial advisers and damaging for the industry. The government's explanatory memorandum to the bill itself admits FoFA will drive the loss of almost 7,000 financial adviser jobs. There will be reduced choice, reduced competition and reduced diversity across the sector. I suppose they are the objectives that the government are seeking to meet—and it would seem they are right on track. Industry estimates suggest that FoFA has a price tag of $700 million to implement, plus $350 million per year for compliance. Worryingly, the government's own Office of Best Practice Regulation has given evidence before Senate estimates that the government has failed to properly assess the impact of the bills. Jason McNamara said the regulatory impact statements did not contain enough information about the potential impact and cost for the government to be able to make informed decisions, especially in relation to the opt-in proposal.

The coalition does not believe it is unreasonable that the parliament should insist on a proper impact statement. It is imperative that regulatory changes of this magnitude go through the proper process. If the government is not willing to follow best practice of its own volition, it should be incumbent upon this place to insist upon it. The coalition has no problem supporting sensible and considered reforms that would bolster trust and confidence in our financial services industries. We value initiatives that increase transparency and competition and allow consumers the greatest choice. Unfortunately, these bills do not meet those objectives.

I have met with financial planners in my own electorate of Cook to discuss this matter over the course of the government's process. They are understandably angry at the time it has taken since the Ripoll inquiry to make any headway, and even angrier with the tranches of bills that are before the House today. One said to me:

If passed without amendment, FoFA will adversely affect all Australians and their choice, as is their democratic right to quality advice … and create a monopoly for advice because only the large financial institutions (Banks and Fund Managers) and Industry Union controlled superannuation Funds will be able to afford the cost of compliance and cheap advice.

That is called creating a closed shop on these issues, something the Labor Party and the union movement have had at least a century of experience in doing. The concerns that advisers in the shire have raised with me centre around four components of these bills, and their fears have been echoed en masse by their colleagues across Australia. I will focus principally on one of them in the time remaining. The proposal of having to opt in every two years is troubling. There is no other country in the world where a government has sought to impose mandatory requirements on consumers to re-sign their contracts on a regular basis. They say there are two certainties in life: death and taxes. I would argue there is a third under this government, and that is increased compliance and paperwork. Ask anyone on the street; they will tell you the last thing they need is to have to wade through another mountain of paperwork every two years. We should not be turning small businesspeople into compliance officers for a regulation-hungry federal government. We should not be turning consumers into compliant drones of the Labor Party and their union dominated policies, which want to make their financial choices for them. That is why these bills should be opposed.

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