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Wednesday, 21 March 2012
Page: 3919

Mr WYATT (Hasluck) (18:49): I rise to oppose the Corporations Amendment (Future of Financial Advice) Bill 2011 and the Corporations Amendment (Further Future of Financial Advice Measures) Bill 2011. I would like to emphasise this immediately: no-one in the coalition is saying that the financial services industry does not need regulation; of course it does. However, the Australian financial services industry was subjected to the stress-testing of the global financial crisis and performed well overall. There is no doubt that Australia's financial services reforms, legislated in 2001, provide the solid regulatory foundation for our financial services industry. Therefore the coalition believes that, with the existing legislature in place and increased resolve to police it, improvements can be made. This point of view was one of the key observations of the Ripoll inquiry in 2009, which stated:

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. Where financial advisers are operating outside regulatory parameters, the consequences of those actions should not necessarily be attributed to the content of the regulations.

This is an extremely important point to make from the beginning and it points to the philosophical differences between the coalition and the Left of Australian politics. When times are tough, when money is tight or when things go wrong, the coalition will look to work harder to improve the existing frameworks, tighten our belts and encourage others to do the same. Those on the other side of the parliament prefer to take the easier option of introducing new taxes or imposing even stricter regulations. This broadbrush approach to governance and fiscal policy is lazy. Instead of rolling up their sleeves and finding ways to improve, the Gillard-Greens alliance think it is easier to put their hands deeper into Australia's pockets than to change the rules of the game to prevent Australians from stopping them.

The government's decision-making processes around FoFA over the past two years were confusing. There were lurches and changes that came from nowhere to the proposed regulatory arrangements under FoFA right up until the introduction of the current legislation. Knowing this government's track record, naturally this was done without proper appreciation or assessment of the costs involved of any unintended consequences or other implications flowing from the proposed alterations.

The reason I am so passionate about this is that in my electorate of Hasluck there are 16 financial service providers serving hundreds of my constituents. They provide an essential service to the community, especially in the Western Australian economy where many people are taking advantage of the mining industry and taking home increased pay packets. Conversely, there are many people in Hasluck who have not been able to take advantage of the mining boom or who work in a different industry.

With all the new taxes heading their way, financial advisers are actually reporting an increase in people looking to make their money work as hard as possible for them. Financial advisers help Australians to increase their financial opportunities and better manage their financial risk. Peter Stewart, of Benchmark Consultants, and David Goode, of Westate Finance are two that come to mind in Hasluck who provide this essential service to the local community. They work hard to provide these opportunities to their clients. They should be supported rather than being faced with increased costs, increased red tape and increasingly unclear and unnecessarily complex legislation.

This is not to say that the industry should not be regulated. Let me be very clear once again and say that, because financial advisers deal with other people's money, they should have a robust regulatory framework to protect the consumer. However, this bill does more harm than good. We need parliament to make things better, not more complex and costly for everyone. Other speakers have gone into the history of this legislation, so I do not intend to linger much on this. I want to spend most of my time expressing my dismay at the content of this bill and representing the views of my constituency—because they are the ones that will be hurt the most. When I was elected as member for Hasluck in 2010, I promised to stand up and fight for the residents of Hasluck on the issues that are important to them. This is one of those issues that I will take up for them.

Financial advisers in Hasluck face job uncertainty and increased costs which will ultimately be passed on to consumers. The Financial Services Council stated that this legislation will cost the industry $700 million to implement upfront and $350 million a year thereafter. Additionally, job losses are expected to be in the tens of thousands across the industry. Government is supposed to facilitate growth by providing the infrastructure and services that the private sector cannot and then getting out of the way.

How is this fiscally and socially responsible, to introduce legislation that Minister Shorten and Prime Minister Gillard know will cost jobs? This is baffling to us on this side of the chamber. Just in Hasluck, in addition to the firms mentioned before, we have Adviser Investment Services in Thornlie, NC Bruining and Associates in Midland, Golden West Financial Services in Midland, Grange Financial Management in Forrestfield, Clarity Wealth Management in Wattle Grove, Howarth Financial in High Wycombe and many more. Can the Minister for Financial Services and Superannuation tell me how many of these firms will expand or shrink, and which individuals will face unemployment, as a result of this bill?. How about the real increased costs faced by each firm? Just like the carbon tax legislation, this bill lacks detail, it lacks proper thought and it increases the costs to everyday Australians.

The residents of Hasluck deserve the opportunity to plan for their future. This bill will adversely affect the ability of people to retire comfortably. This government clearly does not understand the current needs of the community. This government does not respect the right of an individual to make it for themselves. The government should be providing every opportunity for residents to save effectively for their future and impact positively upon their future livelihoods. I know younger members of the local community who are working in the mines, in both the north and the south of Western Australia, and are working extremely hard to earn their money. Younger people are more financially aware than ever before and should be encouraged to seek financial advice, rather than be faced with increased costs to access it and reduced choice and competition in the industry. We should be not only providing people with the opportunity to access this advice now so as to reap the reward for their hard work in the future but also providing the industry with more support and fewer obstacles.

The coalition's amendments will significantly improve this bill. These are the most important of the amendments: that the government be required by parliament to table a regulatory impact statement on FoFA that is assessed as compliant by the Office of Best Practice Regulation; that opt-in be removed from the bill and the retrospective application of the additional annual fee disclosure requirement also be removed; that the drafting of the best interests duty be improved; that the ban on commissions and risk insurance inside super be further refined; and that the implementation of this bill be delayed until 1 July 2013 to align it with MySuper.

The coalition also believes that one way of ensuring that clients are able to access affordable and appropriate financial advice would be to allow advisers and their clients to limit the scope of advice to a series of discrete areas identified by the client, rather than to mandate a full financial plan in every case. This concept of focusing advice to areas specifically identified by a client has become widely known as scalable advice. Numerous submissions to the committee expressed concern that the wording of the best interests provision in the proposed legislation does not allow for scaled advice to be provided. The legislation should allow the provision of scalable advice where the request for such limited or scaled advice is instigated by the client. This would allow many people to access advice more frequently and would be a very good starting point for clients seeking financial advice for the first time as it would not require them to undertake a costly and sometimes unnecessary complete financial plan.

I think the biggest joke of this bill is that the government proposes to have it come into effect on 1 July 2012. When has this government ever been known to implement something effectively in such a short time frame? What is the rush? The proposed commencement date is four months away. It would it make sense to implement this bill simultaneously with MySuper, as they both require significant changes to the financial service provider IT systems; not to do so is indicative of this government's lack of understanding of the practical business realities faced by these companies. This legislation is a disgrace and the epitome of this bad Labor government.

Minister Shorten needs to consider the coalition amendments to save this struggling industry. However, the minister has shown his true colours once again on this legislation—he has completely disregarded his government's own process requirements. On 8 August 2011 the Office of Best Practice Regulation noted that an adequate regulatory impact statement was for only one part of the proposed changes. The other parts, which have the most impact on business and consumers, did not have an adequate regulatory impact statement prepared. Yes, they were drafted, but they were definitely not within the government's own standards. The government's own Office of Best Practice Regulation confirmed this in Senate estimates. It is no secret that this minister has no regard for the financial services industry and obviously no regard for following processes set by his own government.

The coalition supports sensible reforms which increase trust and confidence in Australia's financial advice and financial services industry by increasing transparency, choice and competition. However, any reforms in this area need to strike the right balance between appropriate levels of consumer protection and ensuring the availability, accessibility and affordability of high-quality financial advice. The government has been unable to point to another example in the world where a government has sought to impose a mandatory requirement on consumers to re-sign contracts with their financial advisers on a regular basis. Coalition committee members do not support government attempts through this legislation to make Australia world champions in financial services red tape. The FoFA red tape envisaged in this legislation will increase the cost of financial advice for millions of Australians with no or very little commensurate consumer protection benefit. A government seeking to lead the world in imposing additional financial services red tape should at least submit those proposals to a proper cost-benefit assessment.

If you think this is just the coalition forecasting doom with this legislation, listen to the words of Craig Meller, managing director of AMP Financial Services. His words have no doubt been quoted by my colleagues previously but they need to be repeated and repeated until this government understands that real people will be hurt by this and almost every other piece of legislation it has introduced in this parliament. Mr Craig Meller said there would be job losses of up to 25,000 in the next few years as a result of Minister Shorten's bungling and added that one of AMP's overriding concerns is that the bill has been rushed through in its drafting and that if enacted in its present form it would have a deleterious impact on customers, financial advisers and the broader community. We believe there are so many problems with this bill that a rigorous stocktake is necessary and substantial additional work needs to be undertaken to get the drafting right. It needs to be recognised that this additional regulatory cost of the legislation will ultimately be borne by customers, who will pay more and not obtain the advice they need. But the initial impact will be on financial planners, and even the explanatory memorandum to the bill forecasts a halving of planner numbers in the next few years. We believe this could lead to job losses in the industry of up to that 25,000 figure over that period. We also fail to see how this would improve advice access.

I once again would like to reiterate my opposition to this bill and call on Minister Shorten and the Prime Minister to swallow their pride and at least entertain some of the coalition's amendments to this bill. If they do, it would help keep people across this country in a job. Just one job loss hurts the community of Hasluck. One job loss creates pressure on a family, bills become bigger overnight, children's extracurricular activities get cut, holidays become non-existent and discretionary spending is halted with the heavy strain placed upon them. When we place this legislation next to the mining tax, the carbon tax and the private health rebate, this really does show where the Gillard-Greens' thought process is. They are an alliance driven by ideological means committed to punishing those that strive to better themselves and Australia's forgotten families and our seniors that the Prime Minister once described as not important. This is why I oppose the legislation.