DOMINIC KNIGHT:
But look, the holidays can compound financial pressures. It can be a very expensive time of year with the expectation of buying expensive gifts, and we know that many people are struggling with the cost of living. Recent research finds that many Australians who would love to get some financial advice can’t access it and there have been some problems in recent years with the quality of that financial advice as well. To discuss this, we have Stephen Jones, Assistant Treasurer and Minister for Financial Services, on the line. Minister, thank you very much for joining us.
STEPHEN JONES:
Hey, Dom. Good to be with you.
KNIGHT:
So, look, your government’s getting into this space. What are the current barriers you’re looking at that are preventing people from accessing financial advice?
JONES:
Well, the problem is today we’ve got, you know, thousands of people every week are calling their superannuation fund, asking some pretty basic questions about how they set themselves up for retirement, and the fund has got to say to them, I’m sorry, the law doesn’t allow me to answer those questions and they have to refer them off to a licensed financial adviser. And, for some of them, they just can’t afford it. And there’s a shortage of financial advisors, about 16,000 of them in the country. So, we’ve got a supply problem in the area of financial advice. I want to fix it. I want to get more professional financial planners. I want to reduce the red tape that is not providing any consumer protection. And I want to ensure that those simple questions that people are asking their super fund or their life insurance company can be answered by somebody who’s trained up, has the qualifications to answer those basic questions, with all the consumer protections in place. So, that’s, in a nutshell, what the objective is.
How do we do that? Firstly, we remove some of the red tape that is tying up financial planners. We’ll achieve that, particularly where it’s not providing any consumer protection, it’s just adding lots of form‑filling that doesn’t benefit anyone. So, we’re going to reduce that red tape, but we’re going to create a new category of trained financial adviser, a diploma qualified adviser, who’s going to have a very narrow scope of advice that they’re able to give. And it’ll be specialised in the area of providing advice on the products and streams that are available inside their fund so that when somebody picks up the phone and calls their fund, the fund will be able to answer those basic questions which they can’t answer today.
KNIGHT:
So, you think you can get a happy medium between having more financial advisors while maintaining quality and independence? Because one of the problems we’ve had before, of course, in the past is that some people have sought financial advice from advisers who not only charge them for it, quite a lot in many cases, but also have a vested interest and are getting kickbacks and things like that. Now, I know you’re talking about superannuation specifically, Minister, but it has been an industry in the past where some people really were taken for a ride.
JONES:
No doubt about it. And the Royal Commission put a spotlight on all of that sort of egregious behaviour. So, what will be different? There’ll be no commissions, nothing like that. The fund will be able to pay, charge a fee if they so choose. They won’t have to, but they’ll be able to if they want to have an episodic, say, a one‑off fee for the advice that is given. That’ll be regulated. But the problem we have, and this gets to the nut of it, and if I give you the numbers, you’ll understand what we’re facing into. There’s about 5 million Australians who are either at or approaching retirement, but there’s only 16,000 licensed financial advisers in the country. And they’ve naturally gone up to the high end of the market because the business model really doesn’t support them providing that advice to, you know, people with more modest retirement balances.
So, we’ve got to have something which meets the needs of the average mum and dad retiree, as well as having a solution for people who’ve got higher incomes, and that’s what these reforms will do. It will meet that big retirement wave that we’ve got coming across us – about 5 million Australians that are at or approaching retirement. And if we don’t do this, here’s what I really fear. They’re going to Instagram, they’re going to TikTok, they’re going to ‘finfluencers’, unlicensed, unregulated – and that’s at best. At worst, they’ve been caught up in the scammers and the fraudsters web and they’re losing their life savings. So, we can’t allow that to stand. We’ve got to have a safer door for people to walk through.
KNIGHT:
People might be tempted to put a lot of it into crypto, which I want to get onto a little bit later on with you, Minister. But yeah, so this is financial advice for people about their super. And I guess the question of, how do I make sure I’ve got enough to retire comfortably, what’s the mix between conservative and aggressive elements in my super, and things like that could be useful. But what’s your plan, or is there a plan, for the rest of us who perhaps earlier in our lives, people must be wanting to know, particularly people who are worried about the state of, you know, the high cost of housing for us here in Sydney. How do people know what to do in their 20s, 30s and 40s to set themselves up, whether they should be chasing the dream of owning their own home or if that’s actually not a sensible thing to do with their money? Cause so many of us just seem to have to receive wisdom that housing is the only way to achieve wealth.
JONES:
Sure, great question. Well, we do want to get more people into home ownership and our housing plans are all about that, particularly our Help‑to‑Buy scheme. But in terms of like, there is no shortage of mortgage brokers. If people need advice around, you know, getting into the housing market and they want some financial advice on that, there’s no shortage of licensed mortgage brokers out there, and they do a good job on behalf of their clients. But you’re right; there is a gap there. And I do want to see more professional licensed financial planners, independent licensed financial planners in the market and I want to reduce some of the regulation which is stopping them taking on more clients. We’ve got a whole heap of regulation there which requires them to do a whole heap of form filling, producing, you know, 100, 120 pages of statements of advice that nobody reads.
So, I want to remove all of that unnecessary regulation that was all done for good reasons in the name of consumer protection, but instead of protecting consumers, it’s locking them out of the advice that they need because it’s just crushing the business model. So, all of this is about ensuring that we can get the right balance between protections and getting more supply of advice and information into the hands where it’s needed and doing it in a safe way. And I don’t think anyone can look at the status quo and say we’ve got it right. We don’t. We’ve got a big gap there. As I say again, I’m really worried that the result of that gap is that people are walking into traps, and they’re not making the most of their retirement savings, and they’re getting advice from unreliable, unlicensed sources, and they’re losing the – they could be losing the lot.
KNIGHT:
Social media certainly has a way of filling these gaps these days. A bit of feedback from the text line for Stephen Jones, federal Assistant Treasurer. James says, ‘I have a Bachelor’s of Economics and an MBA. I’m interested in becoming a planner. It’s going to take me 4 years to get qualified. No wonder that there are shortages.’ Alex says that, look, this is – ‘This sounds to me like a return to the vertically integrated model condemned by the Hayne Royal Commission.’ What’s your feedback to Alex, Minister?
JONES:
Yeah, so it’s kind of like an argument for the status quo in most respects. So, we’ve got a crisis, and the crisis needs to be fixed, and, you know, it’s not like we’ve got 10 years to do it. We’ve got Australians approaching or at retirement now and they just can’t get their basic questions answered because the law prohibits, you know, highly regulated entities like superannuation funds from answering those questions. I understand some of the skepticism, I have it myself, which is why we’ll have strong consumer protections, we’ll have no conflicted remuneration, no commissions, none of those trialing fees and none of that sort of stuff, that’ll all be prohibited. No hawking, no flogging of products, none of that sales stuff that used to be, you know, advice dressed up as – sales dressed up as advice. That’ll all continue to be prohibited. But you know, basic questions in a highly regulated environment is the answer to these – the problem we’re facing today.
KNIGHT:
Jane says, on the text line, ‘Super funds need to be clearer about the rules, having to nominate people every few years, withdrawing total funds if diagnosed with terminal diseases and tax and so on.’ So, I can see the help there. Jackie says this is a brilliant solution and says well done Minister. So, a range of feedback for Stephen Jones there. I just want to ask you briefly about crypto. We’ve heard in the news that just today Bitcoin has crossed the US$100,000 mark, a record‑high price. A lot of people have invested in it, and some of them have done well, some of them have done their money. It’s a fairly unregulated space by its nature. I mean, Australians can just sort of get an app and get into it. Does your government plan to get more involved in the space, particularly in terms of consumer protection like the sort of protection you’re talking about?
JONES:
Yeah, we do. So, 2 bits of work going on at the moment. The ASIC, which is the corporate regulator, has got a job of work going underway. A lot of this stuff should already be regulated by the financial law. So, the financial services law, a lot of these products should already be licensed and should already be captured by the Corporations Act and the financial services law. So, ASIC’s got a job of work going on at the moment to ensure the existing law is being complied with, and the government fully supports that exercise. But on top of that, we’re working on the details of a new set of regulation around what we call the exchanges, or the platforms, which are the places where crypto assets are bought and sold, to ensure that they’re licensed and that they have all the consumer protections in place that we would expect in any other part of the financial services industry.
So, 2 jobs of work going on at the moment, amongst all the other things we’re doing to upgrade, you know, regulation in the financial services industry, whether it’s ensuring that our payment system regulator – regulation is up to speed with mobile phone payment methods and new digital wallets and all of these other new payment methods, dealing with the surcharging issues, ensuring that people have access to cash and access to banking service in regional communities, all of these things are going on. So, it’s a busy space.
KNIGHT:
Many, many jobs of work there by the sounds of things.
JONES:
Absolutely.
KNIGHT:
Yeah. It’s certainly – yes, I can see the argument for more financial advice for the large number of people heading towards retirement. Thank you for sharing it with us.
JONES:
Good to be with you.
KNIGHT:
Stephen Jones, the federal Assistant Treasurer.