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Thursday, 22 March 2012
Page: 4087


Mr RAMSEY (Grey) (10:14): I rise to address these two bills. Retirement investment has become very, very important in Australia, and I think it is something to do with our age grouping. Many of us are classified as baby boomers and, as the baby boomer generation has come through, they have benefitted from a great growth in Australia's economic fortunes in that time. Over that period they have been able to designate, in many cases, shorter working lives and be able to make decisions for their future, where slowly the emphasis on providing for our retirement has shifted from government to the individual.

In many cases some of these individuals will be retired for a very long time—possibly 30 years and in some cases 35 years. That means great care has to be taken in one's working life to make sure we have those nest eggs available to us to sustain us in the manner to which we have become accustomed.

In that light, successive governments have made a number of legislative changes which have encouraged people to put money into superannuation type products. Even at the moment we have the ability not only to take the superannuation paid by employers but to top up, even though I was disappointed in the last parliament when the government actually reduced the amount that people could put voluntarily into super.

This general reorganisation of our lives has led to a great escalation in the financial services sector. There is of course general investing, where people buy shares and invest in bank type products, long-term bonds and property. But then there has been a great growth in superannuation type products, both fully managed and self-managed. In the light of some occurrences in the last three years, which actually brought about the Ripoll inquiry, it is this great growth in self-managed superannuation funds that I think will give people pause to have a bit of a think about the way they do business because they have proven to be the most at-risk product and the one with no fall back.

Investors generally place their trust in financial advisers, and this is a good thing. Even though they generally are thorough, honest and professional in the advice they give, there are always those who are not and there are those who make genuine mistakes—in fact, we all make genuine mistakes in life. Financial advisers place a great deal of trust in the organisations that regulate them, including ASIC.

One of ASIC's jobs is to register companies, and register and manage investment schemes. I think there are a number of financial advisers out there, and many people out there, who place a great deal of trust in this registration process and believe that those companies offering services that are registered under ASIC's approval will be robust and be able to meet their commitments as they go forward. Unfortunately, the events of the last few years when we saw the collapse of Storm, Trio and Westpoint provide that this is not sufficient protection and people cannot be fully confident in ASIC's ability to register those companies that have true integrity.

While we are right to focus on the role of local advisers, we should also be having an objective look at the way ASIC license companies into this arena and allow them to operate and offer products. The government commissioned the Ripoll inquiry as a reaction to the collapse of those three companies, and quite rightly. They have done the right thing. I have had private meetings with Bernie Ripoll and I believe that that committee attacked their chore with great vigour and a clear focus on what they needed to achieve. That is why it is important that the government and all of us be careful with the recommendations—the results—that came out of the Ripoll inquiry. The first rule of government, in my humble opinion, let me say, should be to cause as little harm as possible. These bills vary in a number of ways from the unanimous recommendations of the Ripoll inquiry and that is why the opposition will be moving amendments, and that is why we are somewhat wary of what is being proposed here. It is why I am somewhat wary.

I have had an enormous amount of contact on this issue. My friends who are accountants and financial advisers are not normally the most demonstrative of people within our community. But in this particular case they have been properly fired up, and I have had an enormous amount of contact. I have met with a number of financial advisers. I must place on the record that the electorate of Grey was one of the two most affected electorates by the collapse of the Trio Group. There was over $100 million invested in the Trio Group from within my electorate. That came from one medium to large financial advisers group that had recommended their clients invest in this area. Over that period I have had many contacts with constituents who are extremely concerned about their life savings. Not only were they worried about their security but they were worried about the fact that their funds were locked up for a period of almost three years. The ability to run their lives without a secure form of income coming in became very stressful for them. In the end, they were enormously grateful and relieved that the insurance, that is, the levy on the industry, underwrote the risk that they had, and they received their money back. But some still lost significantly, and they were those who were in the self-managed super funds I first mentioned. I believe the loss from Trio Group capital is around $60 million in self-managed super investment funds Australia wide.

To return to the contact that I have had from financial advisers in the industry, the biggest concern without a doubt is the opt-in package that has been brought forward in these bills. That means that once every 12 months the financial adviser has to sit down with their client and reassess the suitability of the package for them and in many cases just collect a signature. That is going to be quite an impost for anybody within the industry to achieve—to have to bring their clients in once every 12 months. You have to make time in your working day. That will require weekend work to try to work around people's schedules. But in the country, it is always different. In the country things are done differently. With insurance agents and financial services deliverers, many of their contacts are made on a personal basis. If you live in a rural setting that means a visit to the farm. In any given day you might get to four or six clients. If you have a couple of hundred clients on your books, that is going to take around 40 days of your time. There is no way that these financial services deliverers will not have to pass those costs onto the people. It takes a bit of time to visit someone in their house. It is all very well to have someone into your office for 20 minutes. But in the rural and regional way we have of doing business, a visit involves time to sit down and have a cup of tea and talk about how the children are going. A little bit of time evaporates. So that is where a large amount of this extra cost will be. The industry estimates it will be $700 million to implement and then a further $350 million per annum to operate. Opt-in was not one of the Ripoll committee's recommendations. That is why I said at the outset that governments should always cause the least harm possible. I am not sure—in fact I am far from convinced on these bills—that that is the government's underwriting guide at all.

You have to ask yourself why; why is the government so intent on thrusting this extra cost on? I understand the argument that they want more security for the consumers. I understand that. But it is far from clear that many of these changes are going to give extra security. It is interesting to note in the evidence that the one group that asked for opt-in were the industry super funds.

This is a recurring theme in this parliament: this alliance, this close relationship, between the government and the Australian Labor Party and industry super funds, which are controlled by their partners in politics, the Australian union movement.

Mr Husic interjecting

Mr RAMSEY: The reason is that we only have to look at the payments from the unions to support the ALP in their electoral quest to understand why the relationship is so close. There has been a lot of noise made in the last few days about some prominent individuals in the Australian community who choose to support the Liberal Party. It is this behind-the-scenes manoeuvring which underwrites the future of the ALP. It was not part—

Mr Husic: That's rubbish!

Mr RAMSEY: I am in the Federation Chamber, Mr Deputy Speaker, and I would ask that you would ask the member to remain silent.

Mr Husic: He is making an outrageous accusation!

The DEPUTY SPEAKER ( Mr Windsor ): Order!

Mr RAMSEY: If it was not part of the recommendations, in that light, it should be eschewed. The time frame is a concern; the industry is very worried about the time frame. It took three months and 10 days to get this enormous change, this enormous new raft of financial regulation, into the Australian financial services sector. It is far too short. In fact, the government has shown in the last few years that they cannot organise a piece of legislation to get through this place in under about two years, and they expect the financial services industry to adapt to these changes which are not yet through parliament in less than three months. That is far too short; it should not be allowed.

As I draw towards the close I would like to focus on some of the words that came from the Ripoll inquiry. This is a quote:

The committee is of the general view that situations where investors lose their entire savings because of poor financial advice are more often a problem of enforcing existing regulations, rather than being due to regulatory inadequacy.

That is an amazing statement. The committee that the government set up, dominated by government members, has said that the framework is not too bad, but what is happening here is that it is not properly enforced. But they have come back now and presented a pair of bills which are about laying a whole new layer of regulation over this industry. This is a recurring theme with the government.

Last week we had new regulation in the transport industry. We are having new regulation, obviously, in the carbon area where companies are going to have to actually invent new accounting methods to those they have used traditionally. Red tape is the number one issue that my constituents come to me about. They say, 'We are drowning in it'—and here we have just another raft of red tape which is going to tie the industry up. Even the government Office of Best Practice Regulation says that the government did not have adequate information before it to assess the impact of these bills.

On the balance we cannot possibly support these bills. We will be moving some amendments which will be more in line with what the Ripoll inquiry recommended. That was the point of the inquiry and it was the point of the announced decision, and now we are being asked to support something which is entirely different. I will be opposing these bills unless, of course, the government is to take on our amendments and allow us to achieve good quantitative change.