I'm delighted to be with you today to officially launch the Financial Planning Association's Financial Planning Week 2004.
Firstly, I'd like to acknowledge the important role that the Financial Planning Association plays in helping consumers.
The work you do to improve the ability of your clients to plan and manage their money is a key component of financial understanding and financial literacy more broadly.
Oscar Wilde, who knew a thing or two about living off his charm and social connections, once said:
"It is better to have a permanent income than to be fascinating.";
I don't doubt that Mr Wilde learnt this fact of life the hard way!
Since very few of us have the opportunity to get by on our personality and looks alone, it's a lesson most Australians already know.
We all need the skills to manage our money so that we can save, and where possible, invest to help meet out expectations of a comfortable life, to provide for our children and to provide an adequate lifestyle in retirement.
This is why the Government has implemented a comprehensive strategy to improve the financial literacy levels of all Australians, and enable them to participate confidently in the market.
The first plank of this approach is the new financial services regime, and the second part is the National Consumer and Financial Literacy Taskforce, which I'll talk about in a few minutes.
As all of you would be well aware, the legislation underpinning the new regime, the Financial Services Reform Act 2001, came into full effect on 11March this year after a two-year transition period.
The FSR Act raises the standards bar for financial services providers and the information that must be given about financial products.
The Government makes no apology for introducing a robust financial framework and I do commend the industry for the positive way in which financial planners have risen to the challenge of meeting the new licensing requirements.
The new regime has been designed to improve the integrity of the financial services market, to provide consumers with greater confidence about the quality of the financial services they receive and to enhance their ability to make informed investment decisions.
It builds on other safeguards such as the Trade Practices Act 1974 which provides wide ranging protection to consumers from unconscionable, misleading or deceptive conduct and is vigorously enforced by the ACCC.
The Government has also provided the Australian Securities and Investment Commission with significant additional funding totalling $90.8 billion over four years to enhance its enforcement and compliance capacity,/ including a dedicated amount of $69 billion for the implementation and enforcement of the FSR Act.
To help protect and inform consumers, the Government welcomes industry initiatives that build on the new legislative framework.
A key example is the FPA's Professional Partner Program, which aims to enhance the professionalism of the financial planning industry.
I'd also like to congratulate the FPA on the launch late last year of "Dollarsmart", the CD designed to improve the financial knowledge of 12-15 year olds.
I look forward to seeing the next step in the "Dollarsmart" concept, as it is developed further for use by adults.
By bringing together a range of licensing regimes to provide a consistent standard,/ the financial services reform act will increase consumer confidence in the financial planning sector.
Now, consumers can look for financial service providers under one banner — an "Australian financial services licence".
As well, the information disclosure requirements/ under the new regime will enable investors to better compare products and services and help them to make better-informed decisions.
In other words, your clients will have the added confidence of knowing their financial planning advice is provided by a licensed professional operating in a robust regulatory framework.
And as well, they will have more transparent information to enable them to evaluate the benefits of different investment products.
I am pleased to report that the new regime has been welcomed by many in the financial services industry. In fact, just last month, Gail Kelly, the Chief Executive of St George Bank, acknowledged that:
"Standards of professionalism and competence have been improved."
Ms Kelly added that she was optimistic that the new regime would screen out "unscrupulous and incompetent players".
Given the importance of financial advisers within the financial services industry, the Government was concerned about the results of the survey, conducted early last year by ASIC and the Australian Consumers' Association, of the quality of financial advice.
I would like to acknowledge that that survey, of course, examined practices under the old, pre-FSR, regime. The new regime has raised the bar for financial planners. As your CEO, Kerrie Kelly, said recently:
"Any similar survey in 2004 would, I am sure, show marked improvements. Nonetheless, the report was a wake-up call. Planners have worked hard to provide better services and to prepare for the Financial Services Reform Act, which will itself lead to better professional standards."
At the end of the day, we all want the same thing — a well-informed, financially literate population that appreciates the role of financial planning and the value of seeking independent professional advice.
The new financial services regime will help us to achieve this. It will encourage more people to participate in the market — to invest, to save, and as Oscar Wilde would have put it, to provide for "a permanent income".
As Mr Wilde learnt, to his detriment, the need to manage our money responsibly is a fact of life.
Another, more unfortunate, fact of life is that some consumers will inevitably fall prey to the dishonest operators who seem to be a constant feature on the financial landscape
Every successive Australian Government since Federation has done their part to implement laws and regulations to minimise the risk of financial fraud.
We can regulate to minimise the opportunities for fraud in society. And we can set up safety nets to lessen the impact of fraud on consumers if does occur.
But unfortunately, we can never legislate against the darker side of human behaviour.
Thinking about this, I am reminded of the words of the US Supreme Court Justice, Louis Brandeis. In 1914, before becoming a Supreme Court Justice, he wrote an influential book on the US banking sector called Other People's Money.
In looking at the best way of combating fraud, he famously concluded that:
"Sunlight is said to be the best of disinfectants and electric light the most efficient policeman."
Today, sunlight is still the best disinfectant against financial fraud. Fraud wilts under the spotlight of wider community awareness.
We only need to look at recent property marketing scams to see that once consumers are made aware of the scam, the incidences of fraud start to decline rapidly.
This is why education is so important. The better informed the population, the better armed they are against con artists of all persuasions.
And the better equipped they are to choose their investments wisely… to understand the relationship of risk versus reward… to manage money responsibly… and to protect themselves against scams and fraud whether they be e-mail offers from Nigeria or more local property marketeers.
A financially literate community is also important for building consumer confidence in the marketplace.
Consumers who feel they are protected and equipped to look after themselves in the marketplace have greater confidence participating in that marketplace.
And more confident consumer participation is not only good for consumers themselves,/ but also good for business and the Australian economy as a whole.
This is why, in February this year, I announced a high-level taskforce to develop the first ever National Strategy for Consumer and Financial Literacy.
The 15-member Taskforce includes educators and representatives from industry, regulators, community and welfare organisations, as well as small business.
The Taskforce is chaired by Paul Clitheroe, widely regarded by Australian consumers as "Mr Finance".
As Paul is a former president of the Financial Planning Association, and Kerrie Kelly, the current CEO of the FPA, is also an active Taskforce member, you can be assured that your industry is well-represented.
The Consumer and Financial Literacy Taskforce will develop Australia's first national strategy to provide consumer and financial education across public, private and community sectors.
In carrying out this work,/ the Taskforce will also examine what motivates people in making financial decisions.
I'm sure you have all dealt with clients who, although they are well- educated and may have a good income, are lacking in "street smarts".
These people often live well beyond their means, putting themselves in financial jeopardy if they suffer any loss of income.
They may invest their money without doing thorough research. Or they may fall for some of the oldest scams in the book.
Why do otherwise responsible people rack up high levels of credit-card debt? Why is the level of personal savings in Australia so low? Why do people invest in schemes without fully understanding what they are getting into?
Once we have an understanding of what motivates people in making financial decisions, we will be better able to effect change to improve their decision-making skills.
And, of course, better-informed consumers will be more motivated to seek professional assistance in making important financial decisions.
The Taskforce will also look at how it can streamline, augment and add to existing consumer and financial literacy information and programs.
While a diverse range of programs already exist, the Government recognises there is a need for a national and collaborative approach to consumer and financial literacy that builds on the many good programs across the country.
The end result will be a nationally coordinated approach to helping Australians increase their capacity to budget, save, invest and understand risk.
The Taskforce has received strong support for its work. A wide range of organisations and individuals — from rural maths teachers to the CEOs of major financial institutions — have provided information, advice and encouragement.
As well as including recognised experts in their fields, the Taskforce is also tapping into international expertise. For example, Professor Elaine Kempson from Bristol University recently provided advice to the Taskforce.
The British Bankers' Association recently appointed Professor Kempson to carry out the 2004 independent review of the British Banking Code and Business Banking Code.
Anne Wettlaufer from the Canadian Bankers' Association is also lending her expertise, as is Ron Sandler, the Chairman of the British Personal Finance Education Group.
In fact, next week Mr Sandler will address the Taskforce at their meeting in Sydney.
At that meeting, the Taskforce will finalise the discussion paper that I have commissioned, which will be released in late May.
The Taskforce will then conduct a series of stakeholder consultations across Australia before delivering its final report to the Government in August this year.
I have charged the Taskforce with an ambitious brief. But I am confident that the end result will be a workable and overarching plan to equip all Australians with the skills and knowledge to make important financial decisions over the course of their lives — from schooldays to retirement.
Although the FPA is already well-represented on the Taskforce, I would still like to see everyone here getting involved in considering these issues and providing input into the work of the Taskforce.
As FPA members, you can play a vital role in lending your own experience and expertise, by either making submissions on the May discussion paper, or through taking an active role in the stakeholder consultations.
This is a great opportunity to improve the financial literacy of all Australians, both now and into the future.
It is an exciting opportunity to ensure that future generations will have those vital financial literacy skills that may have eluded many of the baby-boomers.
Again, I'd like to thank the FPA for inviting me to talk to you today. And I'd like to wish you all the best for your conference, and with Financial Planning Week 2004.