Wednesday, 4 August 2021
Financial Sector Reform (Hayne Royal Commission Response — Better Advice) Bill 2021; Second Reading
[by video link] by leave—thank you; I appreciate that. I disagree with the member for Forde in his assessment that many of those collapses that were mentioned by Labor members and by me in our speeches were a failure of product rather than a failure of advice. I think the fact that those collapses occurred was tantamount to the fact there wasn't a requirement under our law for financial advisers to act in the best interests of their clients. That is what Labor rectified with the Future of Financial Advice reforms, bringing in a legal requirement for financial advisers to act in the best interests of their clients—through regular updates, through an opting-in provision and through ensuring that there was a best-interest duty. The opposition at the time, the coalition, opposed those reforms. They sought to oppose a best-interest duty in Australia's financial laws, and then when they came to government they actually sought to unwind those reforms that were put in place through the Future of Financial Advice reforms by removing that catch-all provision and best-interest duty and the requirement to opt in on a regular basis. They actually got those changes through the parliament. The Abbott government watered down those reforms. It was only through having the vote recommitted in the Senate that Labor, working with the cross-benchers, was able to unwind what the government had done and ensure that we still have a best-interest duty in our financial services laws in Australia.
That's been really important in the context of the royal commission and of this bill here, the Financial Sector Reform (Hayne Royal Commission Response—Better Advice) Bill 2021, because the royal commission inquired into the scandals that were going on in wealth management, in insurance and in financial advice in Australia, after much campaigning and much prodding of the government by the opposition and consumer groups about what was actually going on in wealth management in this country. Earlier I mentioned the growing pool of investment savings. Well, unfortunately, unscrupulous operators were taking advantage of that and acting in a manner that wasn't in their clients' bests interests and in many cases acting illegally. We saw the problems in wealth management in the Commonwealth Bank, which flowed to all of the other big four banks. We saw the CommInsure scandal. We saw many millions of Australians lose savings and financial support because of those scandals.
That is why Labor was calling for that royal commission to be implemented. It should never be forgotten that this government voted 26 times to stop that. It was only once the banks agreed, because they saw the reputational damage that was being done, that the government finally implemented those recommendations. These reforms that we're discussing here are as a result of the Hayne royal commission's recommendations. Finally the government acted and finally they implemented many of those recommendations but there are still more to come. Labor comes from the perspective of trying to support those recommendations and get those reforms in place, because an overwhelming number of those recommendations have still yet to be implemented. Nonetheless, we do support these provisions, subject to the second reading amendment moved by the member for Fenner.
This bill implements recommendation 2.10 of the Hayne royal commission recommendations around a single disciplinary body to be established for financial advisers. The bill also implements recommendation 7.1 of the Tax Practitioners Board review, which recommended that a new model be adopted for regulating tax and financial advisers in line with recommendation 2.10 of the royal commission. Labor has previously indicated that we will seek to rapidly progress any legislation that appropriately implements findings of the royal commission. This bill, in respect of financial standards and financial advisers, expands the role of ASIC's current Financial Services and Credit Panel to provide a single disciplinary body for financial advisers. It requires financial advisers to be registered with the Australian Securities and Investments Commission. It allows financial advisers to provide tax and personal financial advice that relates to tax law if they meet prescribed standards. Again, this is about ensuring that those safeguards, and acting in the bests interests of the client, are in place with these reforms.
The bill also winds up the Financial Adviser Standards and Ethics Authority, FASEA as it has become known, and transfers the power to set professional standards for financial advisers to the responsible minister. We're not opposed to this reform, but we will monitor any changes to professional standards to ensure that they're sensible and that they promote consumer interests, and we will make sure that the minister acts in an appropriate manner in that regard.
There has been quite a bit of concern in the industry, from financial advisers and participants, around the new educational standards and the way that FASEA has implemented those standards. I've personally been contacted by financial advisers regarding some concerns about those standards.That's, unfortunately, why I think we've seen that the government's hallmarks and time lines haven't been met for the introduction of those new standards and for ensuring that participants in the industry meet those standards through educational requirements in a timely manner. It's particularly of the case for financial advisers, stockbrokers and the like who have been in the industry for many, many decades. Some of them received their degrees and qualifications in the sixties and seventies and have been working for many, many years without blemish, without any issues, and are now in a position where they have to undertake university degrees once again, in new circumstances—much of it online where they don't have the capacity to do so. They have real questions about the recognition of their prior learning and the importance of that. Many of them have said to me that they completely understand the need for ethics training—ensuring that ethical standards are up to date—and ensuring that they meet all the regulatory requirements, but they feel the there can be better use of the recognition of prior learning aspects of this education system. I think that that's something that the government will need to take into consideration into the future.
In terms of stakeholders' views on this bill, consumer advocates, including CHOICE, have raised a number of issues with the bill. They seen it as necessary for consumer representatives to be on the panel.
No change would be necessary to the legislation to facilitate this, and to provide for the appointment of a consumer representative to the disciplinary panel, and I support the government appointing a consumer representative with appropriate experience and qualifications. They would also like to be able to consider issues dating back to 2008. That would provide significant retrospectivity on issues in implementing the actions of this particular panel. The Australian Commission for Law Enforcement Integrity expressed some concerns relating to the conflict-of-interest provisions in the bill, indicating that the system relies entirely on self-disclosure by panel members.
It's important to ensure that this particular change works well and is adopted by the industry. Labor support this recommendation. However, we want to see government get on with the job of implementing the remainder of the recommendations of the royal commission. It's almost two years now since that important report was handed down, and a number of those important recommendations are yet to be implemented by this government. Labor stands willing to work with the government and ready to implement those important reforms, but I reiterate what I said at the beginning: without a Labor government we wouldn't have had the best-interest duty for financial advisers, we wouldn't have had the disclosure provisions that have been implemented, we would not have had removal of conflicts of interest and we would not have had ensuring integrity and ethics in our financial advice system. It's a great shame that the coalition, in opposition and in government, sought to undermine those changes. It's time now for the parliament to work together on implementing the rest of the royal commission recommendations.