Senator the Hon Mathias Cormann
Minister for Finance
Date: Friday, 24 October 2014
MINISTER FOR FINANCE: Today we are announcing an important next step in our efforts to lift professional, ethical and educational standards across the financial advice industry.
The establishment of a proper, public register of financial advisers will empower investors, it will empower people across Australia saving for their retirement and managing financial risks through life. It will provide them with transparent information about their financial adviser. It will enable them to verify whether their financial adviser is properly qualified, has the proper experiences and it will help them verify that there is nothing in the adviser’s past that they ought to be concerned about.
It is an important next step. It does build on important reforms of the past, such as the statutory requirement that is in place now for advisers to act in the best interest of their clients and such as the ban on conflicted remuneration for financial advisers.
Happy to take questions.
JOURNALIST: Why has the Government rejected the calls from the Senate Inquiry for a Royal Commission into the financial planning scandal at the Commonwealth Bank?
MINISTER FOR FINANCE: Well there have been several inquiries now into these events and indeed another Senate inquiry has been initiated in recent times. In our judgment, what we need is not another inquiry. What we need is an efficient process to enable aggrieved customers of the Commonwealth Bank with legitimate outstanding issues to have these issues resolved as efficiently as possible. And the announcement by the Commonwealth Bank of the Open Advice Review Program, including the establishment of an independent panel to be chaired by a former High Court Justice and various other related initiatives, we believe, was a good announcement and we believe that process should be given the opportunity to work.
JOURNALIST: Has the Government caved into lobbying from the big banks?
MINISTER FOR FINANCE: Not at all. We have not been lobbied in relation to these matters by the big banks as you call it. We have very carefully considered the 61 recommendations that were made by the Senate Economics inquiry into the performance of ASIC. You have got to remember that the events we are talking about here are events that took place in the period between 2003 and 2012. A lot has changed since then when it comes to the regulatory framework in particular. Since then, the Parliament has imposed a proper, clear and unambiguous statutory requirement for advisers to act in the best interest of their clients. The Parliament has since that time banned conflicted remuneration for financial advisers. There are issues that ought to be resolved and the Commonwealth Bank properly announced a process for its aggrieved customers to resolve any legitimate outstanding issues and we believe that it is in the public interest for that process to be given a chance to work. We don’t believe that yet another inquiry on top of several inquiries in the past and another inquiry that is currently underway in the Senate is the best way forward.
JOURNALIST: So how will the public register help the public?
MINISTER FOR FINANCE: Well the public register of financial advisers will ensure that anyone across Australia who is saving for their retirement, who is managing financial risks through life and accessing the services of a financial adviser is able to verify that the adviser is properly qualified, has the appropriate experience, has got good credentials in the industry, that there is nothing in the past in terms of his track record as a financial adviser that they ought to be concerned about. It provides transparent information about who the adviser works for. So it really is a tool to empower investors to inform their decision making when it comes to accessing the services of a financial adviser.
JOURNALIST: And the Opposition says a public register is no replacement for strong laws? What do you say to that?
MINISTER FOR FINANCE: The Opposition is making a lot of noise. I see that they have complained that we didn’t proceed with a Royal Commission into the Commonwealth Bank. But I didn’t actually hear them make an announcement that they would in Government proceed with a Royal Commission into the Commonwealth Bank. So if the Opposition wants to tell us that their policy in the lead up to the next election is to initiate a Royal Commission into the Commonwealth Bank, they should say so. If that is not their policy position, then really they should just let the Government get on with the job of actually making a positive difference. Now we are very focused on the public interest with all these things. We are very focused on making sure that we have got a robust but efficient regulatory system in place when it comes to financial services because it is very important that we get the balance right for consumers. We need to ensure that there are appropriate levels of consumer protection. But we also need to make sure that the red tape burden is not so big that access to high quality advice becomes unaffordable for too many. What we have set out to do with our reforms to financial advice laws is to keep all the consumer protections that matter such as the ban on conflicted remuneration for financial advisers, such as the requirement to act in the best interest of their clients. But we have done away with the excessive, unnecessary and costly red tape which has pushed up the cost of advice for investors across Australia and which of course put pressure on people’s retirement savings because ultimately any costs that are imposed on this industry through excessive red tape is ultimately funded out of people’s retirement savings.
JOURNALIST: Was the public register, was this part of the deal with Clive Palmer and when will his FOFA Bill be taken to the Senate?
MINISTER FOR FINANCE: Well you are quite right. When we reached an agreement with the Palmer United Party about their support for our improvements to our financial advice laws, one part of that agreement was to press ahead with an establishment of the register of financial advisers. It is also something that was a recommendation of the Senate inquiry into the performance of ASIC and it is also something that has been recommended by the Financial System Inquiry. So I think that there is broad support for this. We announced in July that we would work with all relevant stakeholders to progress the establishment of this register. We are now in a position to announce exactly how it will work and how it is going to be funded and that is the announcement that we have made today.
JOURNALIST: When will this FOFA Bill be taken to the Senate?
MINISTER FOR FINANCE: The Bill is before the Senate now. So the legislation to give effect to our improvements to our financial advice laws is in the Parliament right now. It has been the subject of two Senate inquiries so far. Both of those inquiries have recommended its passage. We are hopeful that it will be passed by the Senate very soon.