Sue Boyce (Queensland, Liberal Party) Share this | Hansard source

We should at least find it refreshing that the opposition has moved on from budget scaremongering about the government kicking grannies and starving students and beating up the unemployed. They are trying to develop a whole new scary monster at the bottom of the bed concerning the future of financial advice provisions. I remind the Senate that in 2009 the Joint Committee on Corporations and Financial Services, of which I was a member and which was chaired by the now shadow minister for financial services and superannuation, Mr Bernie Ripoll, came up with a bipartisan response on how we might go about improving the integrity of financial planning following the Storm Financial collapse and the terrible problems that resulted from that. It was a bipartisan report, and two of the things it particularly looked at were the development of a best interests test for financial planners to ensure they are acting in the best interests of their clients and abolishing the payment of commissions and conflicted remunerations—commissions both up-front and trailing. This legislation does that, and that is exactly what the committee chaired by Mr Ripoll, with the support of the then opposition, the now government, agreed to and that is what we recommended.

The committee went on to have inquiry after inquiry into the many tranches of Minister Shorten's future of financial advice legislation, and, as Minister Cormann pointed out in question time, only one submission suggested that we have opt-in requirements for clients. That came from the Industry Super Network—they were the only ones who suggested this should happen. Much of what the then government put into FoFA was basically about pleasing their political masters, not about protecting consumers. I would like to refer briefly to the dissenting report of the 2012 inquiry into FoFA. The coalition members of that committee, of which I was then the deputy chair, made the point that there were a number of high profile collapses in financial services across Australia, and we cited Storm Financial, Trio and Westpoint. We could add to that Timbercorp and the Sherwin Group in Brisbane—the list could go on and on. The point is that those collapses happened because financial advisers broke the law then—they behaved in a criminal fashion. They did not meet the requirements—which needed tightening up, I agree, but still they did not meet them. I feel nothing but extreme sympathy for people who have been affected by the like of the collapse of Storm Financial, but getting rid of the red tape in the FoFA legislation and making sure it is easy to use will in no way assist those people. I would quite confidently but sadly stand here and say will be another rort conducted by someone, but that will not be someone who is acting within these laws—it will be someone acting outside the laws. I spoke to someone recently who had been affected by the collapse of one of these groups, and they said that we should legislate to stop it. We have done what we can to set up a very strong framework, but asking us to stop collapses happening is like asking us to legislate to stop burglary. The people who instigate those collapses, who con investors, are people who are breaking the law—and that was the law before FoFA was introduced.

In our dissenting report we brought up the fact that the current legislation as it stands around best interest duty is at best confused and at worst unenforceable. The Trust Company, who are not exactly a political body, have said:

The best interest duty as expressed in the Bill is a prescriptive duty and will cause confusion and uncertainty in the industry. It is confusing a duty of care on one hand with a duty of loyalty on the other. The Bill attempts to address a duty of loyalty by using standards and rules which are associated with the duty of care. These two duties cannot be confused. It is the duty of loyalty that underpins the fiduciary obligation and it is this duty that should be met

The Joint Consumer Group have said:

… it may be difficult for courts and external dispute resolution schemes to interpret the duty and there is a risk that their interpretations may not further the government's policy aim.

That being the then Labor government. The opposition can do their damnedest to develop scary monsters at the end of the bed, but in the end these are the expert people who know whether the law relating to best interest duty as the then government put it into place can be enforced. What is the point of a law that cannot be enforced? It is crazy for this scaremongering to continue. This legislation as we have developed it is exactly what we said we would do two years ago. It has been done to assist consumers as much as possible.