Senator the Hon Mathias Cormann
Minister for Finance
Date: Wednesday, 16 July 2014
JOHN MCGLUE: Well Finance Minister Mathias Cormann has been looking pretty happy in Canberra today. He's seen off a challenge to his changed on how financial advisers are regulated. Labor, the Greens and the cross benchers had threatened to disallow Senator Cormann's changes but a last minute deal with Clive Palmer no less has saved the day for the Government. He has won the battle, the Finance Minister, but the war is going on. Critics pretty unhappy today with both the changes and the manner in which they have finally been decided. Mathias Cormann welcome to Drive, good to talk with you.
MATHIAS CORMANN: Good afternoon.
JOHN MCGLUE: What exactly did you promise to do for Clive Palmer in return for his support for your regulations?
MATHIAS CORMANN: Firstly I have got to correct something that you said in your introduction earlier. You said that the Senate had threatened to disallow our improvements to financial advice laws. That's actually not correct. It was the Labor Party and the Greens Party that threatened to do that by lodging notice to disallow those improvements. The Senate voted last night to support the improvements that we have put forward. What is important to remember is that all we really have done with the Regulations that came into effect on 1 July, is give effect to the election commitments we made in the lead up to the last election. That is that we would work to ensure more affordable access to high quality financial advice by removing unnecessary and costly red tape while maintaining all the important consumer protections that matter for consumers.
Now you asked me what we have done in relation to our interactions with cross bench Senators. I have been transparent all the way through that once the Senate changed on 1 July it was very important to me to have the opportunity to brief the cross bench including and in particular the Palmer United Party and the Australian Motoring Enthusiasts' Party about the improvements that we were making and why. There has been a lot of misinformation spread through a coordinated campaign from a vested interest perspective, namely the industry super funds movement. So having had those conversations with Mr Palmer as Leader of the Palmer United Party, he understood what we were saying, but he also made some suggestions on how our improvements could be made even better. The Government considered those suggestions. We thought they were sensible suggestions and we decided to adopt them. That's what I confirmed in the Senate last night. That's what the Government will be acting on.
JOHN MCGLUE: I guess Senator when I say that you were under threat with these regulations I am going on what Clive Palmer himself was saying on the past couple of days, which was that he was going to vote to disallow them and join with the Greens and join with the Labor Party and you were on ropes on this until you met with Clive Palmer and there was a meeting of minds on some basis which saw the Palmer United Party's Senators to side with you, to side with the Government and to see these regulations effectively upheld. My question to you Senator was what have you done or what are you going to do for Clive Palmer in return for his support because it wasn't there two days ago.
MATHIAS CORMANN: Here is the important point. I mean the Labor Party and the Greens have been inaccurately asserting for months now that the Government was removing the requirement for advisers to act in the best interest of their clients. That is just not true. We have always supported that requirement. It was introduced into the Corporations Act by the previous government with our support. That requirement remains in the Corporations Act with our support. We are not changing it. I was able to explain all of those things to Clive Palmer. What he pointed out was that it was very important for both advisers and their clients to be very clear in relation to that at the time that the advice is provided, the advice is accessed. So what I agreed to do in consultation and having discussed these matters with Mr Palmer is that I would be making some further changes to introduce a requirement for various rights and obligations, rights for consumers and obligations for advisers to be specifically listed in the Statement of Advice that is provided by the advisers to the client and it has to be signed by both.
So for example, what I have agreed to do in response to my discussions with the Palmer United Party and the Australian Motoring Enthusiasts' Party is to ensure that there is an explicit statement in the Statement of Advice that an adviser is required to act in the best interest of their client and prioritise their client's interest ahead of their own and that is consistent with the requirements that are already in subsection 961B and 961J of the Corporations Act. I have also agreed that any fees need to be disclosed and the adviser will apply a fee disclosure statement annually if the client enters into or has entered into an ongoing fee arrangement after 1 July 2013. I have also agreed that in the statement of advice, it's got to be made very clear that a client has a right to return financial products during the 14 day cooling off period in accordance with the requirements currently provided for under Division 5 of Part 7.9 of the Corporations Act. So the important point here is that a lot of these rights for consumers are already in the Corporations Act, they will continue to be in the Corporations Act. But what we are making sure is that consumers are made aware very clearly in the statement of advice as to what their rights are and what the obligations of the advisers are.
JOHN MCGLUE: It's 4:13pm on Drive. You're with John McGlue. My guest is the Finance Minister Mathias Cormann talking about what happened in the Senate yesterday, which was a vote that effectively upheld the regulations on financial advisers that Senator Cormann had brought in from 1 July as the effective date.
Minister, Seniors Australia is clearly very concerned with what you've done and they've used some pretty strong language. The Chief Executive Michael O'Neil said that you had done a grubby deal with Clive Palmer. He's unhappy about the deal itself, but more than that. He's passing judgement on the manner at which the deal came about. He's saying that you are guilty of doing a grubby deal. How do you feel about that?
MATHIAS CORMANN: I'm very disappointed about the language the CEO of National Seniors Australia used. You've got to remember that this is a policy issue that has been on the agenda for nearly four years. The Coalition first expressed concerns about Labor's changes to financial advice laws in April 2011. We made a formal announcement about our policy on how we would improve financial advice laws by cutting costly, unnecessary red tape which is pushing up the cost of advice, while keeping important consumer protections that matter in place in March 2012. We took it formally to the last election. We consulted all the way through. We consulted through a formal process after we got into Government. Earlier this year, when I became the Acting Assistant Treasurer in March, I paused implementation of the Regulations at that time to conduct some further consultations. I had a couple of meetings after that with National Seniors and they have got a particular view. I don't agree with their view, but I am disappointed of course with the language that the CEO of National Seniors has been using today.
JOHN MCGLUE: You see the thing is that there's a picture building here Senator. You've got the concern from the critics of the changes you're making to financial adviser regulations. You've got the Senate Committee report on the Commonwealth Bank investment advisers which was pretty damning. You've got some pretty strong words in the interim report of the Murray Inquiry about the lack of financial qualifications of financial advisers. So you're sort of getting a general picture here in Australia of dysfunction in the financial advisory industry, fairly or unfairly and I'm just wondering, next time there's a big financial scandal that comes along, you've been out there saying everything is right, everything is rosy. When another scandal comes along and the finger of blame gets pointed at you, how are you going to manage that?
MATHIAS CORMANN: John that is just not true. I have not said that everything is right and everything is rosy. That is just completely inaccurate to make that statement. What I have said is that not every bit of red tape is good for consumers. The instinct of politicians can be that whenever there is a problem that the first instinct is, well let's impose more regulations, irrespective of whether it actually makes a difference. I'm going down the more difficult path politically to actually say, okay, let's keep the good regulations, those that actually make a difference in an efficient way and let's get rid of those impositions that actually don't make a difference. What we need is a robust but efficient regulatory system that is competitively neutral, where people across Australia saving for their retirement, managing their retirement, managing financial risks through life can access high quality financial advice they can trust which is also affordable. A number of the changes the previous government made to our financial advice laws were good changes and we supported them. But some changes were bad changes and they essentially went for regulatory overreach. We said very transparently all the way through in the lead up to the last election that wherever there is a bit of red tape that imposes additional costs without delivering proportionate consumer protection improvements, then that was bad for consumers and we would remove those.
JOHN MCGLUE: Senator, a final question. It's a couple of weeks into the Senate, you've been there for quite a while and we're getting a pretty clear picture of life in the new Senate, just a couple of weeks old and it looks like Clive Palmer has an effective veto over so much of what the Government wants to do. What's the point, or where is the point when the Government says 'we've had enough of this, enough is enough' and will you go back to the voters for a double mandate for the upper house as well as the lower house where you already have that? Where's the point where you say 'we've just had enough of this'?
MATHIAS CORMANN: We've only just started. The new Senate as you say is only into its second week. As far as I'm concerned the Government was elected in September last year. We were elected to provide good government, to repair the Budget mess that we've inherited, to build a stronger, more prosperous economy so everyone can get ahead. We are getting on with the job and part of getting on with the job is of course to engage constructively and courteously with all of the Senators represented in the Senate. The Government doesn't have the numbers in the Senate. That is not a new phenomenon. That is something that has been the case for most of the time of the last thirty or forty years. The previous Government had a questionable majority in the House of Representatives but controlled the Senate totally. Now of course the situation is a more traditional situation again where governments have to negotiate their measures and proposals through the Senate. There's nothing new under the sun.
JOHN MCGLUE: We'll keep watching with great interest. Thank you so much for your time today.
MATHIAS CORMANN: Always good to talk to you.
JOHN MCGLUE: Mathias Cormann there, the Federal Finance Minister and a very staunch defence on his part of the regulations, the changes to how financial advisers are regulated and deflecting the criticism and it's been pretty harsh today from National Seniors Australia and from others.