GARRY LINNELL:
Today the Assistant Treasurer, Kelly O’Dwyer, is announcing a crackdown on financial planners. I think this is long overdue. All new financial planners will be required to hold a university degree and all planners nation-wide will be required to sit a national competency exam. That would suggest that right now the qualifications for doing this work aren’t really up to scratch. Let’s find out more – the Assistant Treasurer is on the line with us now and the Small Business Minister. Kelly O’Dwyer, good morning.
MINISTER O’DWYER:
Good morning.
LINNELL:
Kelly thanks for joining us. There are a lot of people out there this morning waking up saying “well, it’s about time”.
MINISTER O’DWYER:
You are absolutely right. We need to improve public confidence and trust in the sector and it has been mocked in the past couple of years where we have heard some pretty awful stories and peoples’ lives have been dramatically impacted by the trust that they have placed in their financial advisers and some of that has been misplaced. We believe it is really important to make sure that they have the right training, the right education and more appropriate ethical standards. That’s why we have released draft legislation to improve all of those areas to make sure that new financial advisers get a degree, they undertake a professional year, and that they pass an exam.
JOHN STANLEY:
What sort of degree are we talking about here? Does it need to be, obviously need be in the financial area?
MINISTER O’DWYER:
That’s right and even once they have got that degree that is simply not going to be enough. As they undertake their career they will need to also continue to have professional development and that will require them to do that each and every year and they will need to be party to a code of ethics as well, to make sure that they are making sensible, ethical choices on behalf of those people that they are representing.
LINNELL:
So will this apply to people who are currently hanging out their shingles as financial planners?
MINISTER O’DWYER:
Yes, it will apply to existing advisers. There will be some transitional arrangements for those people who are currently in the industry. They’ll need to pass that exam. They need to have a basic level of competency and if you can’t pass a basic exam you clearly don’t have that level of competency to be providing advice to people about their retirement savings or their money or their financial future.
LINNELL:
What do you regard as a basic level of competency?
MINISTER O’DWYER:
They need to be able to provide competent financial advice and so we have got an external panel that will put together an exam for these people to make sure that they are meeting the basic requirements that would be considered core for any financial planner.
LINNELL:
What do they need now? I mean, can there be people doing this without any qualifications at all?
MINISTER O’DWYER:
That’s right.
LINNELL:
Nothing at all, they just put the shingle up and off they go?
MINISTER O’DWYER:
This is exactly why the Government has acted…
LINNELL:
It’s extraordinary isn’t it?
MINISTER O’DWYER:
… very quickly to make sure that we can restore public confidence and trust in the sector. Most people in the sector, as you quite rightly pointed out, most people in the sector are hardworking, very competent people but there are some people out there who don’t have adequate training and who aren’t giving proper advice.
LINNELL:
One of the biggest issues facing people looking for financial advice has been not knowing whether or not the financial planner they are seeing is getting a commission from some of the services that they are recommending. What are you doing about that?
MINISTER O’DWYER:
With the changes to financial advice, the majority of commissions have actually been banned which means that you can’t get an upfront commission if you’re providing that advice. The disclosure requirements for how payments are made have been strengthened and for those people selling life insurance we recently also made some changes to give effect to reform within that industry. In the life insurance industry you were able to get an upfront commission of 120 per cent of the premium – upfront. Which is why we were seeing a huge amount of churning within the industry. The last 12 months people would be sold a new life insurance package and that would be because sometimes their life insurance advisor would be getting a direct financial benefit from that, so we’ve made changes to that. We have announced those changes and we have said that that is simply not going to be on.
LINNELL:
Just quickly Minister while we’ve got you on the line, you’re not thinking about defecting to the National Party?
MINISTER O’DWYER:
No. I know one of my colleagues who is a member of the LNP in Queensland has chosen to walk through a different Party Room door when he comes to Canberra…
LINNELL:
Is that embarrassing for the PM?
MINISTER O’DWYER:
The truth is actually in Queensland it is very different to the other parts of the country, the LNP is one party up in Queensland whereas for the rest of the country they are two separate parties. So it is probably not as controversial as a lot of people might…
LINNELL:
I think you are right, I think Queensland is very, very different to the rest of the country.
STANLEY:
Kelly O’Dwyer thank you for your time.
MINISTER O’DWYER:
Great pleasure.