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Tuesday, 7 February 2017
Page: 97


Mr VAN MANEN (FordeGovernment Whip) (18:07): It is always a pleasure to rise in the House to speak about the terrific work that this government is doing to improve the standards and efficacy of advice in the financial advice services industry in this country, but I take issue with a couple of comments that the member for Fenner made. He was focused on advisers in a bank setting. There are far more advisers in Australia than those employed by the banks. There are many independent, professional financial advisers in this country who want to see the standards of their industry improved and developed for the future to ensure that the advice that is provided to the Australian public is in their best interests. It is of no interest to these small business owners around the country to provide poor, negligent advice or poor ongoing service to their clients, because then they do not have a business. Many of these people actively support the provisions outlined in the Corporations Amendment (Professional Standards of Financial Advisers) Bill, in terms of improving education standards, and many of those people are already at the forefront of pursuing high educational standards in the industry. So it is with great pleasure that I stand here and speak on this bill today, because I know that the people that I speak to in the industry on a regular basis support this bill and support the amendments we have made over time through listening to what the industry has said to us.

I, like anybody else in this place, acknowledge that there have been problems in the financial planning sector in years past, but many of the reputable organisations have sought to weed out those advisers who were doing the wrong thing. The dealer groups who had advisers in their ranks who were doing the wrong thing should fully be held to account, because Australians deserve to know that when they go to see a financial adviser they are going to get professional, unbiased advice that is in their best interests. What this government, in the previous term and in this term, is focused on is ensuring that advisers provide advice to Australians that is in their best interests, because we already know that many Australians are underinsured, and insurance is a key component for people's financial arrangements. We know that as people build larger and larger superannuation balances they are going to need advice along the way, in particular when they are close to their retirement years, to make sure that their financial affairs are in order for when they want to retire. So it is critically important that we ensure that the network of financial advisers—both those employed by the banks and those who run their own businesses as small business owners around Australia in small country towns and in suburban locations around our major cities—are capable of providing that professional advice to their clients.

This bill seeks to introduce a number of new measures which will require relevant providers to hold a degree, pass regular exams and complete a professional year, just like solicitors, accountants and lawyers do when they finish their degrees. They cannot immediately go and practise. They have a professional year, or maybe a couple of years, where they are under the supervision of somebody who has the experience and the qualifications, not just qualifications from a degree but practical, day-to-day experience providing advice to their clients. So these new entrants to the industry will come in with a degree and a professional year and be taught by somebody who has developed a reputation and the knowledge from day-to-day practice. They will also undertake ongoing, continuing professional development. This is enshrining in law something that already happens for professional financial advisers. I know that when I was an adviser we had a minimum of 30 or 40 continuing professional development points that we had to achieve every year through a variety of subjects. If you read any of the industry literature—a financial planning magazine or an AFA magazine—most have continuing professional development components in them to allow practitioners to ensure that they are meeting their current ongoing professional development requirements.

The bill will also ensure compliance with a uniform code of ethics. As I said at the outset, over the past 10 or so years there have been repeated instances of inappropriate financial advice which, quite rightly, have decreased consumer confidence in the financial advice industry. Not all of these circumstances are actually the responsibility of an adviser. There have been many instances over the past 10 years that relate to product failure that the adviser has borne the brunt of. I think that this is something that still needs to be addressed in the structure of our regulation, but this lack of trust and confidence has led to poor outcomes for both consumers and the industry, with consumers often reluctant to seek financial advice, and, as I have said, it is becoming more and more necessary.

The latest figures show only one in every five Australians now seeks financial advice, yet at a time when the financial circumstances for many people are becoming more complex. Raising the professional standards of financial advisers seeks to play a significant role in improving consumer trust in the financial advice industry. As a result of that I hope that what we see are significantly improved outcomes in the financial wellbeing of Australians.

The government has consulted widely on the measures in this bill, which build on the model proposed by the Parliamentary Joint Committee on Corporations and Financial Services, and the recommendations of the financial services inquiry. When investigating underlying causes of the failings and lack of consumer confidence in the industry, concerns were raised for both of these avenues—over the existing education and training requirements for financial advisers—by not only the financial advice industry but also by consumer groups, the government, the parliament, ASIC and the parliamentary joint committee. In its report, it provided proposals to lift the professional, ethical and education standards of the industry. The reforms in this bill seek to commence a journey of delivering on those improvements for consumers by raising education standards to a degree level or equivalent.

Both the financial services inquiry and the PJC reviews identified that existing professional standards for advisers were too low and did not ensure all financial advisers have the necessary skills to provide high-quality advice to consumers. And there have been a number of reports subsequent to that which have outlined some of those issues, particularly if we look back at the recent changes to remuneration for life insurance advisers based on an ASIC report into some of the issues in that industry.

These reviews recognised the current regulatory framework was not enough to build a broad base of professionalism in the financial advice industry, even though—as I said earlier—there are a number of very successful professional financial planning firms and advisers in the financial services industry already. With this bill it is hoped that we see an encouragement to the industry to itself take the steps to lift its standards. The reviews also found the current framework lacked incentives needed to encourage the industry to go above and beyond.

There is widespread support for these changes across industry, consumer groups and the parliament—for the standards to be maintained among practising advisers through continuous learning. To implement these changes, the government will establish a standards body which will set the education standards, exams, a professional year and continuing professional development required, as well as develop a code of ethics. The standards body is expected to consult broadly with the industry and other stakeholders in developing these standards to ensure that concerns raised by stakeholders are addressed and that the standards meet the expectation of consumers and the industry. Importantly, a substantial time frame is being given for advisers to work towards meeting the minimum standards. The new standards body is expected to be established by mid-2017 but, importantly, the changes for advisers do not commence until 1 January 2019. The expectation is that all advisers in the industry will meet the new education standards by 1 January 2024.

Under these changes, financial advisers will require a degree, while existing advisers will need to meet a standard equivalent to a degree set by the new standards body. While the detail will ultimately be set by the new standards body, it is important to note that not all existing advisers will have to return to university and complete a three-year degree program. Some may not, but a majority are likely to receive a credit for the education or training they have already completed and will need only to gap-fill or undertake bridging courses to meet the minimum standards required by 1 January 2024.

These reforms represent a necessary and valuable change to the current regulatory environment for financial advisers. This bill upholds the government's commitment to raising professional standards in the financial advice industry and forms part of a broader reform plan to more effectively align the interests of the financial advice industry with good consumer outcomes.

This bill shows that we are actively taking the reforms necessary to deal with the issues that have been experienced by consumers in the financial services sector around Australia. But that is not to say that there are not a good many professional financial advisers out there today working day in and day out for the best interests of their clients. They are providing professional advice on an initial and ongoing basis. But everybody in the industry recognises the importance and the need to make these changes and to lift the standards. I commend the bill in its original form to the House.

The DEPUTY SPEAKER ( Mr Buchholz ): I thank the honourable member for his contribution and acknowledge his contribution to the financial sector before coming to this place—a worthy contribution.