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Thursday, 22 March 2012
Page: 4068

Mr SHORTEN (Maribyrnong—Minister for Financial Services and Superannuation and Minister for Employment and Workplace Relations) (18:33): Reluctant, as I am, to take up further time of parliament I am a little concerned that Hans Christian Andersen has been writing some of the shadow Treasurer's comments. I think there are some points which need to be made but I will try to keep it fairly brief.

First of all, the shadow Treasurer accused me of conflict and bias. I am agnostic about which form of superannuation people invest in but I certainly do not accept the standard coalition attack on industry funds as being union dominated. They have independent directors and they have equal representation with employers. To accuse people like Peter Collins, former leader of the Liberal Party in New South Wales, as being some sort of union stooge I think is unfair in the extreme.

Mr Hockey interjecting—

Mr SHORTEN: Well General Peter Cosgrove is on it.

The SPEAKER: The minister will return to the question of the amendments before the chair.

Mr SHORTEN: Furthermore, there were some other comments made which belong more in the fairytale books than in reality. The Cooper review did recommend opting in. There were some comments made about execution-only stockbroker services. They will not be caught up in FoFA in the manner in which the member for North Sydney said.

I will go now to the opposition's specific amendments (1), (2), (19), (21) and (30). The opposition amendments would significantly reduce the availability of simple personal advice to superannuation fund members by no longer allowing the cost of this advice to be collectively charged. This would narrow the existing arrangements for advice to superannuation fund members. Instead we intend to implement the recommendations of the Cooper review in relation to the provision of intrafund advice. This position ensures that all members of a superannuation fund can easily access advice about their entitlements. This is critical, given the mandatory nature of superannuation in Australia. The government will consult on the implementation of these recommendations as part of the development on the stronger super reforms.

Coalition amendments (4), (5), (6) and (7) would introduce a formulation of the best-interest duty that could be complied with by following a tick-a-box approach. This significantly weakens the application of the duty and lessens the level of protection offered to consumers.

Opposition amendment (8) would significantly weaken the ban on conflicted remuneration and allow it to be easily circumvented. General advice can involve recommendations to clients and as such clients receiving general advice need similar levels of protection to those receiving personal advice.

Coalition amendments (9) and (12) would result in the erosion of retirement benefits for superannuation members that are beneficiaries of group insurance policies outside of MySuper. These policies are not tailored to the needs of individual members so it is appropriate to ban commissions on these products. This position is consistent with the recommendation of the Cooper review.

With regard to coalition amendment (10), the government's formulation of the carve-out for execution-only services provides a much clearer and, from industry's perspective, much more certain application of the carve-out because it excludes any situation where advice had been provided to the client in the last 12 months. The opposition amendment, by introducing the need for ASIC to establish a causal link between the benefit and the advice, makes it easier for the carve-out to be used to circumvent the application of the ban on conflicted remuneration.

Coalition amendment (11) is not necessary as payments associated with the sale of a business would not be considered conflicted remuneration under the legislation. Opposition amendment (13) seeks to undermine the government ban on soft-dollar benefits by extending the existing exemption for training beyond training for the provision of financial advice. Coalition amendment (14) is simply not necessary. The government has already moved away from the Australia-New Zealand requirement for the training exemption as reflected in the replacement explanatory memorandum I am about to table.

Opposition amendment (16) seeks to undermine the government's ban on soft-dollar benefits by carving out any non-monetary benefits paid to an employee by an employer. This would significantly weaken the ban, particularly for vertically integrated advice providers.

Opposition amendments (17), (28) and (29) seek to narrow the definition of fund manager used for the purpose of the ban on volume-based shelf space fees. This would weaken the ban and allow for the continued provision of these fees by some fund managers. Opposition amendment (18) seeks to define these fees in a way that may not reflect their economic substance. That would weaken the ban. Opposition amendments (20), (22), (24) and (25) are consequential amendments to the removal of fee disclosure statements. Amendments (26) and (27) by the opposition would allow for the grandfathering of all volume benefits paid by platform provisions to advice providers. This would significantly weaken the ban on conflicted remuneration as it would allow platforms to enter into open-ended arrangements prior to the commencement of FoFA. The government has already announced its position in relation to the grandfathering of these payments and will be implementing this through regulations in the coming weeks.

May I use the remaining four seconds to thank Treasury staff for all the hard work have done in all these preparations. (Time expired)