Carol Brown (Tasmania, Australian Labor Party, Shadow Assistant Minister for Infrastructure and Regional Tourism) Share this | Hansard source

The Treasury Laws Amendment (Ending Grandfathered Conflicted Remuneration) Bill 2019 implements recommendation 2.4 of the Hayne royal commission into misconduct in the financial services sector. Six months after the commission's final report, the bill ends grandfathering arrangements for conflicted remuneration for financial advisers. The royal commission highlighted the extent to which conflicted remuneration can erode member balances and lead financial advisers to provide advice that could be at odds with members' best interests. Speaking on the banking royal commission's final report, Treasurer Josh Frydenberg said:

Grandfathered conflicted remuneration can entrench clients in older products even when newer, better and more affordable products are available on the market.

The practice for conflicted remuneration or commissions for advice has been ingrained practice in the financial sector for a number of years. Ending these grandfathered arrangements will provide certainty to consumers and make clear to the sector what is expected of them.

Labor will be supporting this bill. Prosperity and fairness are core Labor values. They are values that should be central to Australia's financial services sector. Labor led the charge for a strong and fair financial sector. Labor instigated the sweeping reforms in financial advice in 2012 and, when it became clear that more needed to be done, Labor called for a royal commission two years before the coalition were dragged to implement it. That is why we are committed to implementing all 86 of the Hayne royal commission recommendations.

We will be holding this government to account on the implementation of these reforms. They never wanted a royal commission into the banks in the first place. This government voted against it 26 times before they were forced into it. Mr Morrison was so opposed to the idea of a royal commission that he was dragged into it by the banks themselves, and the Morrison government are now dragging their heels on implementing the reforms that could clean up the banking sector and get our financial services sector back on track. Since the election, we are only now seeing the first legislation relating to the royal commission being brought before the parliament. This government is big on talk and slow on action. According to the government's own implementation road map, only eight recommendations out of the 76 have been implemented by the government since February.

While this bill will end conflicted remuneration, it won't do so for almost two years. Conflicted remuneration has been proven to lead to poor advice and poor member outcomes. These arrangements shouldn't remain any longer. The government had a chance to act sooner. In February, Labor tabled a bill in the House of Representatives that would've done what Commissioner Hayne recommended and ended grandfathering arrangements for conflicted remuneration. That bill would've come into effect a full year before the coalition's bill will even start. It would have ended commissions for good, and it would have done it sooner.

Labor is determined to see these arrangements end. Consumers cannot continue to fall victim to the damage of commissions that leave them in poorly performing products and saddled with excessive fees. This government is moving at a glacial pace—so slow that even the banks are moving faster than them to clean up their own poor practices. In June 2018, Westpac announced that they would remove grandfathered commissions on the accounts of 140,000 clients. In August 2018, ANZ announced they would start rebating commissions to clients on the OnePath platform. In September 2018, NAB also said they'd start rebating grandfathered commissions to their own clients. And in October of last year, the Commonwealth Bank committed to rebating nearly $20 million to 50,000 clients of Commonwealth Financial Planning.

The sector is ready and able to end the conflicted remuneration practices. The coalition has always been dragged to the table when it comes to reforming financial advice. It wasn't too long ago that the coalition were voting against reforms to end commissions. It wasn't until Labor introduced the Future of Financial Advice reforms in 2012 that members gained protection from conflicted advice.

In 2014, the coalition government were quick to move to water-down these reforms. In particular, the coalition sought to wind back the best interest duty and restrictions on conflicted remuneration. In other words, this government thought it was a good idea to wind back protection for members and to support the interests of financial planners who were conflicted in their advice. It took Labor and a coalition of common sense to disallow these reforms.

The coalition would have you believe that they're on the side of consumers. Nothing about their history suggests this is true. This government cannot be trusted to put consumers' interests first and cannot be trusted to implement the banking royal commission recommendations. Even more recently, the government have bungled reforms to professional standards in the advice sector. The Financial Adviser Standards and Ethics Authority has gone through three CEOs in 2½ years since it's been operating. The government has pushed back the deadlines for advisers to meet key educational and qualification requirements. The chaos in delivering on these reforms is diminishing standards in the financial advice sector, and it's consumers who pay the price.

At every turn, this government has sought to delay, water-down or vote against cleaning up the finance sector. Only Labor has been consistent in pushing for reforms to the banks plagued by scandal. We don't intend to stop, and we will be holding the government to account on implementing the banking royal commission's recommendations. Labor believes that this is only the first step in ending conflicted remuneration in the finance sector. Commissioner Hayne said:

Advisers facing a conflict between self-interest and duty have too often sought to strike some compromise between the two competing forces rather than, as the law has required, to give priority to the interests of the client or member.

More needs to be done to ensure that intermediaries are acting in the best interests of their clients. Labor believes that ending exemptions for listed investment trusts, life insurance and other financial products should also be considered. Labor wants to see a prosperous and fair financial sector. The sooner the banking royal commission recommendations are implemented, the stronger our finance sector will be.