John Williams (NSW, National Party) Share this | Hansard source

Mr Acting Deputy President Sterle, might I say how good you look in the chair's position there, and I hope that in the short future you are nominated for Deputy President; I think you would make a fine Deputy President.

I take offence to Senator Bilyk saying that those on this side just look after the big end of town. I started this job at the same time as Senator Bilyk and Senator Cameron, on 1 July 2008. In January 2009 I went to Redcliffe to meet with the Storm Financial victims. I was the first politician to meet with them, and I guaranteed them that I would do my best to get a Senate inquiry, which we had the numbers here to do. However, it went to a parliamentary joint committee. So, Senator Bilyk, do not come in here and tell me that I do not stick up for the battlers around this place, because I think I have done more for the battlers—those who have lost their money through shonky products and bad advice—than anyone else in this chamber.

I want to make it quite clear that I follow this very closely. I went on to the PJC, chaired by Mr Ripoll, and was on it right through that inquiry. And I will tell you what was wrong: the product was wrong. Storm Financial's product, as soon as there was a drop in the share market, was doomed for failure. The customers were geared so heavily with their debt that there was no way that the return on those shares and the capital growth in those shares could pay for the standard of living and all the interest on the debt for their house and their geared investments. It was a shonky product, and we need to see that more of these products are not out there.

But let me just talk about this whole FoFA modifications issue. The underlying objective of FoFA was to improve the quality of financial advice while building trust and confidence in the financial advice industry. We need an ethical financial planning industry with ethical products. Why is the government seeking to amend some of the consumer protections contained in FoFA? The amendments to FoFA seek to navigate the fine line between ensuring that unnecessary and burdensome regulations that drive up the costs of business and ultimately of consumers are removed. Just one in five Australians seek professional financial advice. We need to raise that. We need to raise that enormously, especially for the some 30 per cent of Australians who now have self-managed super funds—around $600 billion worth of money out of the $1.8 trillion worth of super. I am not going to see shortcuts in that advice.

This week Senator Bishop will deliver the report of our inquiry into ASIC that was supported by all around the chamber, especially Senator Cameron. I have made it quite clear on the public record that I want to see more. I want to see every financial planner licensed in this country—not just one licence for a big institution that may have 300 planners, but the whole 300 licensed. I want to see their history on the internet so that people can research them—whether they have been consistent in their employment, whether they have stayed in the one job for so long, what their record is like. And I want to see ASIC have the power to automatically suspend that licence—just one phone call; when ASIC receives information on wrongdoing, of not putting the interests of the client first, ASIC can call that financial planner and say: 'Charlie Brown, as of this minute you are out of your industry, your licence is suspended. You can go to the Administrative Appeals Tribunal and make an appeal, as everyone has a right of appeal, but my advice would be that perhaps you should go down to Centrelink, because we have the clear evidence that you are not putting the clients' interests first.'

And it is in there in black and white: the six points. The key consumer protection objectives of FoFA will remain. Advice will continue to be in the best interests of the client, full stop—not negotiable. The advice must be appropriate. An adviser must provide a warning if there is any incomplete or inaccurate information. An adviser must priorities their client's interests ahead of their own. Conflicted remuneration structures, including commissions, that have the ability to influence advice will continue to be banned, and consumers will continue to have access to high-quality financial advice. That is what we are doing, and that is a protection of the general public, which is such an important issue to protect.

Regarding general advice on conflicted remuneration, I might add that in a division in here just last week Senator O'Neill said to me, 'Why are you bringing back commissions for general advice?' We are not. They are banned. They are not coming back. But let me say this: you can plug every hole in the wall as far as giving incentives to employees is concerned, but another hole will develop. I see nothing wrong with giving an incentive to workers for doing their job well and performing well, as long as they are not ripping off the people. For example, if a bank teller at the front counter talking to the public cannot get an up-front payment or commissions on it, that is fine. But what is to stop the bank from saying to that person, 'If you refer at least 50 clients to professional advice, we can knock 20 basis points off your home loan, or we can give you a company car.' You can plug every hole, but holes will still develop when it comes to institutions providing incentives for their workers. And in some cases—probably in many cases—the incentives are very good.

Commissions paid in relation to general advice will not be introduced, despite the scaremongering of many of the people trying to put out false information on this very issue. I come again to that point of ethical advice and behaviour. I mentioned what I would like to see come out about the licensing of financial planners. If they do not put the interests of their client first, regardless of what institution they work for, if they go flogging the products of their institution to get promotions or to get whatever and if that is not in the best interests of their client, then they should be suspended from the industry.

I want to move on to why the obligation to act in the client's best interests is being amended. The bills that are being introduced do not remove the requirement for advisers to act in the best interests of their clients. The requirement is enshrined in subsection 961B(1) of the Corporations Act. We have been through those parts that will remain, and they have to remain. As far as the opt-in goes, we received something like 460 submissions to that Parliamentary Joint Committee on Corporations and Financial Services in relation to the collapse of Storm Financial, Opes Prime, Timbercorp, Great Southern et cetera. The requirements to obtain the client's agreement at least every two years adds an unnecessary and costly layer of red tape. And I will tell you why: new clients will continue to receive a fee-disclosure statement, which will contain the same information they would have had to have to determine whether they wanted to continue the fee arrangement or not. I will repeat: they will continue to receive a fee-disclosure statement. They will know what the fees are, they will know what their planner is charging them. That is the important issue here in this debate.

Stakeholders have indicated that due to the age of the systems involved it would cost almost twice as much to prepare a fee-disclosure statement for a pre-FoFA client than for a post-FoFA client. We cannot just go putting costs out, because, as I said at the start, only one in five Australians seeks financial advice from a financial planner. We need to raise that, and no doubt the ASIC inquiry we have just had has put a lot of smear on that industry—well, not smear, but it has certainly darkened it. And we need to lift that up and improve the quality so that people have faith in it.