Mehmet Tillem (Victoria, Australian Labor Party) Share this | Hansard source

I rise to take note of Senator Cormann's responses to Senator Dastyari and Senator Bishop's question on the proposed FoFA legislation. When delivering his second reading speech on the former government's FoFA legislation in 2012, Senator Cormann said: 'In pursuing regulatory change the parliament must focus on making things better.' We on this side of the house are committed to making things better for the consumer, but those opposite are hell-bent on making things better for the bankers. I am told that there are several bankers on the benches on the other side—but bankers also are entitled to have a say, especially the merchant variety. The backflip and the decision to put FoFA on the backburner is underpinned by the fact that, when it comes to the proposed legislation, it is only the bankers who support it. Everyone else—whether it is the super funds, the consumer groups or the economists—supports the existing FoFA legislation that was enacted by the former government.

The desire by those on the other side to move to opt-in requirements for financial advisers has been defended under the ruse of reducing red tape. That argument is nonsense. It is clearly not that difficult for advisers to obtain written consent from their clients every two years to permit further charging of fees for ongoing services. The measure is designed to prevent the rorting of unwitting customers at the hands of exploitative Jordan Belfort types within the financial services industry. Without this legislation financial advisers who are so inclined could potentially continue to charge fees to clients without them ever knowing it. This provision ensures that there is a necessary added layer of disclosure between advisers and their clients, a vital measure for making an often esoteric industry less opaque to ordinary people seeking often complicated financial advice.

In the government's outline of proposed changes to the FoFA legislation they argue that requiring advisers to provide annual fee disclosure statements to their clients existing before 1 July 2013 is overly burdensome. What this means is that, if the Liberals get their way, clients who already had ongoing arrangements with financial advisers prior to 1 July 2013 will no longer be afforded the same level of protection as new customers. To discriminate between the two is patently absurd. It is a completely arbitrary policy decision that discriminates between clients of financial advisers for no reason other than to assist the feathering of the nests of the Liberals' mates in the financial services industry.

Related to this are the coalition's proposed changes to grandfathering arrangements in the industry which will permit advisers to move between licensees and still retain their existing grandfathering arrangements. In other words, advisers who move firms will remain exempt from many of the provisions introduced by the former Labor government. This is perhaps the most concerning of all the coalition's policies in that it will negate by stealth a range of provisions in place to protect consumers from self-serving and potentially harmful financial advice. What is the point of having these FoFA protections in place if the Liberal Party are determined to make them so easy to circumvent? The Liberal Party have decided to make extensive changes to conflicted remuneration provisions, and the best-interest duty should be the guiding principle for all financial advisers. Under the proposals by Senator Sinodinos, who is now dealing with his own bottom-of-the-harbour problems—no pun intended—Minister Cormann is now responsible for the best-interest proposal that will no longer apply to one-off advice—