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Tuesday, 10 February 2015
Page: 333


Senator WILLIAMS (New South Wales) (17:17): I move:

That the Senate take note of the report.

The inquiry by the Joint Parliamentary Committee on Corporations and Financial Services into the standards of financial planners was a very, very important inquiry. It was a result of the inquiry that the Senate had into the Australian Securities and Investments Commission. ASIC's Regulatory Guide 146 is just amazing. The committee received frightening evidence that someone could go online and do a course of a few hours and be qualified to be a financial planner and advise people how to invest their tens of thousands, hundreds of thousands, even millions, of dollars, simply by doing a brief questionnaire on the internet. Some say it was an eight-day crash course of study. It is vital that this parliament, including the other house, change these regulations. It is a bit like a surgeon who does a crash course on the internet or an eight-day crash course being qualified to perform operations on a human. That would be totally unacceptable. In this case, we looked at the savings of Australians to see that they get proper financial advice and see that the advice is in their interest first and foremost, as those opposite did with FoFA and which we left in FoFA.

It is amazing that, on 3 July last year, the CEO of the Commonwealth Bank of Australia, Mr Ian Narev, said in a statement:

Trust goes to the heart of a relationship between a financial institution and its customers. At the centre of the matters which a recent Senate Committee reviewed, is the very disturbing fact that some people working for our Commonwealth Financial Planning (CFP) and Financial Wisdom (FWL) businesses breached that trust. They failed in their primary obligation - to act in the best interests of our customers.

That of course was in response to the damning Senate inquiry into the performance of ASIC, and both the CBA and Macquarie Private Wealth were collateral damage. CBA announced two weeks later that it was adopting new minimum education standards for Commonwealth Financial Planning Ltd financial planners, supervisors and managers of planners. I welcome this decision by the Commonwealth Bank. Likewise with NAB, ANZ, Westpac and many other financial institutions: the standard must be raised.

CBA identified around 400,000 people who could have received shoddy advice. Macquarie Bank is writing to some 160,000 people. We are talking about more than half a million Australians who may have received bad advice. The worst aspect was the lack of oversight of these advisers, who were in many cases allowed to run rampant. If I achieve one thing in my time in the Senate, it is to see that ASIC, the overseer of these people, carries out its duties much better than it has done in the past.

Going back to 2009, the Corporations and Financial Services Committee undertook an inquiry into financial products and services in the wake of the collapse of Storm Financial and Opes Prime. I was a member of that committee. We all remember those disasters. CBA had to pay out over $250 million in compensation and the Bank of Queensland agreed to $17 million compensation over the Storm Financial debacle. Many fights are continuing in the courts.

With the terrible financial pressure on families, the cost to the taxpayers where people were retired, owned their home and had a nest egg and who in many cases are now renting and on a pension. It is disgraceful that people who are in the twilight of their lives are relying on a pension, when they had owned assets and were self-sufficient.

During that inquiry the committee heard that the cost of poor financial advice over the past decade could be as high as $37 billion. The alarm bells started to ring then: were the financial advisers working in the best interests of their clients or the financial institutions? FoFA was a result of that inquiry.

Other scars on the financial landscape have been the collapse of Trio Capital and Westpoint, let alone Timbercorp and Great Southern, and some of those other, crazy, managed investment schemes.

The common factor in all these was bad financial advice and, in some cases, fraud. The analogy for investing in bad financial products I use is: these financial planners were selling cars without brakes, and the people who bought those cars went downhill and crashed into trees. We cannot have this go on in the future.

I would like to thank the committee chair, Senator David Fawcett, for his great work and all the members of the committee. I would hope that, when these changes come to this place, they are supported unanimously—to lift the education standards of financial planners so that it is no longer the farce it has been for many years. I am very confident we will get this right to ensure that in the future hard-working Australians with, in many cases, self-managed super funds, worth some $600 million or $600 billion—I may have the figures wrong—get good advice and grow their retirement nest egg so that they can retire with the financial security and the lifestyle they have worked for all their lives and so that they are not a tax burden on the taxpayers of Australia. That is the whole idea of superannuation.

Could I thank the secretary and everyone involved in the committee and I look forward to the changes being brought forward—hopefully very soon in this place.