The Abbott government has done a deal with Clive Palmer to ensure the passage of its financial advice laws which water-down changes made under the previous Labor government.
The deal was announced shortly after the Senate voted against disallowing a series of government regulations. The Senate voted 31-34 against the disallowance move.
The Finance Minister, Senator Mathias Cormann, announced that the government had agreed to additional protections as a condition of the support of the three Palmer United Party senators and the Motoring Enthusiast Senator Ricky Muir.
Clive Palmer claimed the changes were “a major win for everyday Australian investors and responsible financial advisors”.
The reforms were criticised by NSW ALP Senator Sam Dastyari and Tasmanian Greens Senator Peter Whish-Wilson.
- Listen to Clive Palmer’s media conference (17m)
- Watch Senator Sam Dastyari (7m – transcript below)
- Watch Senator Peter Whish-Wilson in the Senate (8m)
- Watch Senator Peter Whish-Wilson on News24 (3m)
Media statement from the Minister for Finance, Senator Mathias Cormann.
Senate Support For Financial Advice Law Improvements
The Senate’s vote in support of the Government’s improvements to our financial advice laws is good news for consumers and for small business financial advisers.
The Senate tonight voted in favour of more affordable, high quality financial advice by removing unnecessary and costly red tape, while maintaining all the important consumer protections that matter for consumers.
Consistent with our commitments before the last election, the statutory requirement for financial advisers to act in the best interest of their clients remains in place, as does the ban on conflicted remuneration.
However, as we promised we would do before the last election, we have
- removed the requirement for an investor to keep re-signing contracts with their advisers on a regular basis (Opt-In);
- simplified and streamlined the additional annual fee disclosure requirements;improved the operation of the Best Interest Duty; and
- provided certainty around the provision and availability of scaled advice.
Consistent with our comprehensive statement of 20 June 2014, to provide clarity and certainty for the financial advice industry and investors seeking financial advice, the Government’s changes to FOFA have been implemented through regulations which took effect on 1 July 2014, where that was legally possible.
The Government will continue to progress the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014 through the Parliament in an orderly fashion.
The Government appreciates the constructive approach taken by cross-bench Senators in discussions about our financial advice law reforms.
In particular we thank Mr Palmer as the Leader of the Palmer United Party and Palmer United Party senators, the Australian Motoring Enthusiasts Party and Senators David Leyonhjelm and Bob Day for their support for our FOFA improvements.
The Government will implement all of the additional improvements as agreed with the Palmer United Party and the Australian Motoring Enthusiasts Party over the next few months.
We will keep working with all interested parties in the Australian Parliament and all stakeholders in the financial services industry to continue lifting professional, ethical and educational standards for financial advisers.
Our goal as a Government remains to ensure we have a robust but efficient financial services regulatory system, which is competitively neutral so that people saving for their retirement or managing financial risks through life can access high quality advice they can trust and which is also affordable.
Media statement from Clive Palmer, leader of the Palmer United Party.
Palmer United Protects The Rights of all Australians
A range of new consumer protection measures proposed by the Palmer United Party were agreed to by the Federal Government today in a major win for everyday Australian investors and responsible financial advisors.
Following discussions with the Palmer United Party over the Future of Financial Advice (FoFA) laws, The Minister for Finance, Mathias Cormann, on behalf of the Government, has tabled a letter in the Senate today stating that the Government will make further regulations within 90 days to ensure key changes to improve affordable, high quality financial advice, removing unnecessary and costly red tape, while protecting investors.
Palmer United Party federal leader and Member for Fairfax, Clive Palmer, said his party could only support financial advice laws that were “fair for all Australians”.
The government has agreed to Palmer United’s strengthened consumer protection provided by financial advisers to their clients and signed off by both.
These measures which include:
- That the adviser is required to act in the best interests of their client and prioritise their clients interests ahead of their own.
- That any fees are to be disclosed and that the adviser will provide a fee disclosure statement annually.
- That a client has the right to return financial products under 14-day cooling-off period.
- That the client has the right to change his or her instructions to their adviser, if for example they experience a change in their circumstances.
The Government has also agreed to establish an enhanced public register of financial advisers that includes the adviser’s credentials and status within the industry.
“The Palmer United Party will only support FoFA regulations that are unambiguous, transparent and clear,” Mr Palmer said.
“It appears that a common-sense approach has prevailed following a successful conversation with the Minister and the diligent work of the Palmer United Senate team which always has the best interests of Australians at heart,” Mr Palmer said.
“We cannot have a FoFA framework that puts ordinary Australian investors at risk, where their retirement plans could be potentially ruined by unscrupulous financial advisors putting their own interests first,” Mr Palmer said.
“Our solution for Australians is not the Liberal way or the Labor way, but the right way.”
“We must have a system where the best interests of the clients are taken into account,” Mr Palmer said.
Hansard transcript of remarks by Senator Sam Dastyari on the disallowance motion.
Senator DASTYARI (New South Wales) (16:11): I, and also on behalf of Senator Whish-Wilson, move:
That the Corporations Amendment (Streamlining Future of Financial Advice) Regulation 2014, as contained in Select Legislative Instrument 2014 No. 102 and made under the Corporations Act 2001, be disallowed [F2014L00891].
I rise today to speak about the values that are at the heart of the Australian Labor Party and at the heart of this society. They are very simple values but they are values that we will defend in this chamber and outside this chamber. We are the party of hardworking Australians who are saving for their first home, saving to put their kids into a good school, maybe even if possible to a great Australian university, and putting some money aside for their retirement. We are and have always been the party of the Australian worker and we stand proudly in both the Senate and the House to ensure that, as best we can, the deck is not stacked against our people. We, in the Labor Party, will always give our voice to preserve the values of fairness and integrity. Today, I rise to put my voice on the record opposing the government’s changes to Future of Financial Advice laws.
How did we get here today? We all know that the Abbott government wanted to make some changes to the FoFA legislation. We, in the Labor Party, have been very clear that we will negotiate with the government and with our friends on the crossbenches, that we will consult with the financial services and advice industry, that we will consult with consumer groups and that we will consult with legal experts in order to improve, where necessary, FoFA legislation. But we will not allow this government to abuse parliamentary process, which is exactly what they have done in this instance. We will not allow this government to introduce changes by stealth, changes that are widely roundly opposed by consumer and advocacy groups like Choice, National Seniors, Council on the Ageing.
We will not allow this government to introduce changes at the 11th hour—a move that has been widely criticised by financial journalists and legal academics, and even surprised officers of the Senate.
As we have heard in this chamber over the past 5 ½ sitting days, Senator Cormann’s regulations made with the Governor-General’s signature on 26 June—that we do not support and that weaken consumer protections—came into effect on 1 July before anyone outside the government had the opportunity to see them, let alone consult or consider them. As I stand before you today, Senator Cormann’s changes are allowing unscrupulous advisers and banks pushing their own products, hustlers running their get-rich schemes and seminars, and all of those con artists preying on working Australians to now bypass the best interest duty and to make their income by putting their own financial gain above the interests of consumers.
We will not allow this government to erode basic consumer protections. We reiterate—and this was echoed this morning by Choice, by National Seniors, by COTA and by my friend, Acting Deputy President, Senator Whish-Wilson—that we will not allow the government to make changes to the FoFA legislation: without consulting widely with the financial advice industry, many of whom are concerned about a return to the dark days before FoFA; without consulting with consumer groups, all of whom are concerned about a return to the horrific losses that happened before FoFA was introduced; without consulting with legal experts, many of whom are concerned about eroding basic consumer protections; and without ensuring that the voices of people who have been the victims of the regime that existed before FoFA—people like my friend, Naomi Halpern, who joined us in the parliament today—who have shared their experiences and stories here in this place.
That is why we, in the Australian Labor Party, are in the Senate. That is why we are in this place. I ask the government: who they are here to represent? Who are they lending their voice to? Who are they standing up for in this chamber? Are they people like Naomi Halpern, who are putting away money for their retirement? Are they people like those represented by National Seniors and COTA, or people trying to ensure that their kids can have better opportunities? Or are they simply standing up for the banks and the financial service industry, trying to take money off the very people who rely on us to make laws, legislation and regulations that are in their best interests?
I know who I will stand up for. I know who I will fight for. The people I represent do not wield power and influence within the Liberal Party. They probably will not be donating to Senator Cormann’s re-election campaign. We, in the Labor Party, respect those who do, and we will consult with everybody in good faith if we have an opportunity to have a proper debate about reforming FoFA laws. We will work in good faith with all parties to improve FoFA legislation. I say to Senator Cormann that we will even consider the concerns of some of the interests that he has been protecting. But we will not allow this government to ram through changes by stealth, to deliberately restrict this parliament’s ability to scrutinise changes. We will not be bullied into accepting the will of the powerful and we will not back down from standing up for Australian consumers. I urge the Senate to disallow these regulations.