Tuesday, 19 June 2007
Corporations and Financial Services Committee; Report
On behalf of the Parliamentary Joint Committee on Corporations and Financial Services I present the committee’s report, incorporating a dissenting report, entitled Corporations Legislation Amendment (Simpler Regulatory System) Bill 2007 and related bills, together with the evidence received by the committee.
Ordered that the report be made a parliamentary paper.
by leave—I am pleased to speak to this report of the Parliamentary Joint Committee on Corporations and Financial Services. This report relates to the package of simpler regulatory system bills forming the current tranche of the government’s corporations reform agenda. Whilst we welcome this report and the simplifications, there are many measures that do not go far enough. Indeed much of this has been quite confused, as the bill has been presented without the regulations, leaving many of the people who presented before the committee’s inquiry quite confused as to exactly where they stand.
This package of amendments has as its primary aim the simplification and facilitation of access to affordable financial advice for consumers. It is a laudable objective and something we should all be aiming for. Unfortunately, we are not there yet. The piecemeal approach to it is causing great confusion for consumers and their advisers and needs to be rectified fairly urgently. There are numerous people today who are retiring and accessing large lumps of super. They need to get the best simplified and affordable advice they can, and the current situation does not really allow that.
The committee is mindful that stakeholders took different views on a number of proposed measures and identified specific areas that might need further refinement. This is quite true. The numerous people before the inquiry asserted that advice would now be cheaper in light of these changes, but we were unable to find anybody who could demonstrate why or how that would be the case. Certainly, financial advice needs to be more accessible to everybody, even to those with small amounts of money to invest. Whilst in general the measures in the bill represent some progress towards simplification of some elements of our complex financial regulatory system, it is far from a comprehensive set of solutions. Indeed, it has all the indications of a rushed set of measures.
The Treasury submission indicates further piecemeal reform is still to occur—for example, on the major matter of sales recommendation. This matter will be the subject of ongoing development for possible inclusion in a further legislation vehicle. Further regulation will not be available as it should be, given the important detail to be included, until after the passage of the legislation, so we are going to have the legislation but not the regulation to explain how it is all going to work. It is disturbing that after three years of financial services reform, FSR, disclosure documentation is still lengthy, complex and unreadable, often of some 50 to 100 pages. The purpose of FSR was to give people documentation they could understand. More importantly, it was to give people documentation they could take away and compare, planner to planner and adviser to adviser. With 50 to 100 pages most people give up in frustration and take the first set of advice, which is not always the best advice they could be getting. There is every indication from Treasury and witnesses that there will be little change after the passage of legislation. Further, no consumer testing has yet been carried out by Treasury.
Given the rushed, ad hoc nature of the approach, it is necessary to ensure that there are not adverse, unintended consequences—particularly given the lack of regulation detail—on the critical consumer protections to be contained in the record of advice. The ‘do not directly receive’ direct remuneration can be circumvented by indirect remuneration, and the $15,000 threshold provides the capacity for many millions of Australians with super balances less than this figure to potentially receive, in some cases, poorer advice. We all know there are literally hundreds of thousands of unclaimed super accounts out there waiting for people to take them up. We need to ensure that people have better access to finding this information and to consolidating their money. At the end of the day, as the famous ad said, ‘It’s your money, Ralph.’ People should have it and they should have it somewhere it is going to be a benefit to them in their retirement.
The lack of detail and undertakings from industry that, despite a claimed improvement in efficiency and reduction in cost, prices charged will actually fall is of concern. The committee looked at this issue in detail. If we are going to introduce these measures to simplify things, the assertion was that therefore there would be less work and less onerous reporting, and that this would reduce costs. In the current situation we do not know what the actual costs are, so we are not sure how we are going to testify that they are going to be lower. We need some certainty that people will be able to afford advice and that advice will cost less. Whilst I recommend that we support the passage of the bill, there is a lot of work still to be done and it should have been done in a more timely and professional manner.