HAMISH MACDONALD:
This is RN Breakfast. Later today the federal government will unveil long awaited changes governing financial advice. It will accept 14 of the 22 recommendations made by the Quality of Advice Review chaired by Allens partner Michelle Levy. But a key recommendation to exempt financial institutions like banks, insurers, fund managers from the best interests duty will not be adopted.
Assistant Treasurer and Minister for Financial Services is Stephen Jones who will announce these changes in a speech shortly but he's with us now.
Good morning to you.
STEPHEN JONES:
Good to be with you, Hamish.
MACDONALD:
Why are you adopting only some of these changes given that the person that did the review said that the package really needed to be adopted in full because in full it works for consumers?
JONES:
The review made an important contribution to debate around information, advice for Australian consumers. It was one of the inputs. But we also can't ignore the findings of the Hayne Royal Commission and we can't ignore the events that have led to the situation where we are today over a decade or more of problems within financial markets, harms to consumers and the need to ensure the consumers are well protected.
So I'd characterise the government's response as one that is cautious, one that has the needs of Australians, particularly those 5 million Australians who are approaching retirement at the fore. We want to ensure that they have the information and advice that is necessary for them, and we want to ensure them –
MACDONALD:
Given all of those inputs –
JONES:
– we want to ensure that they get –
MACDONALD:
– that you're describing, Minister, why loosen regulations around advice in the superannuation sector but not when it comes to banks and insurers?
JONES:
Yeah, good question, let's focus on the superannuation sector. About five million Australians retiring, because of the successful superannuation system now retiring with more money than they have ever had in their life.
The interface that they're retirement income has with the pension system is complex. Most Australians will be retiring on a part‑pension plus a superannuation contribution. We want to ensure that they're enable to navigate that system with the best advice available to them in their own interests and ensure that they make that money work for them.
At the moment superannuation funds have an obligation on them to put in place a retirement strategy for their members. However another set of rules make it almost impossible for them to provide that information and advice to their members. We want to ensure that we make some cautious, careful but targeted adjustments to those rules so that funds can give appropriate information and advice to their members to help them navigate what is a very complex system.
MACDONALD:
So why not ‑ if you're saying that's necessary and a good thing within the super sector, why shouldn't someone be able to ring their bank and get advice, get good advice that the bank is obliged to give for perhaps a better arrangement for their loan, their mortgage?
JONES:
Yeah, great question. Because I've looked right across the ecosystem of advice that's currently available, and nobody's been able to convince me that there's a critical shortage of mortgage advisors. In fact the overwhelming majority of new mortgages that have been written in Australia today are advised by a mortgage advisor. That system is working well and I see no reason to want to upset those arrangements to fix a problem in the banking sector that is not immediately apparent to me.
There is a problem that needs to be fixed in the area of retirement income advice. It's acute and I want to make that the priority. I haven't said I won't look at those other areas, but the priority of this government is the five million Australians who are either at or approaching retirement.
MACDONALD:
But given the cost‑of‑living crisis, given the pressures on mortgages, everyone trying to find those extra dollars for themselves, wouldn't it make sense to actually force insurers and lenders to be giving good advice in the same way that you might do with the super sector so that someone can ring up the provider they have and be assured that the advice they're getting is good about what's best for them?
JONES:
In the area of mortgages Australians are already doing that. They're approaching their mortgage advisors and there is no shortage of mortgage brokers who are providing ‑ currently today are providing that advice to consumers about how to get the best mortgage available. That's overwhelming the relationship that people have with their banks and their credit providers.
MACDONALD:
So that's your advice to anyone that's not sure at the moment whether their mortgage is the best one, go see a mortgage broker?
JONES:
It's what Australians are doing right now and they're getting ‑ overwhelming they're finding a better deal through their mortgage broker than they would otherwise provide. And that's not happening in the area of retirement and income advice because there's a shortage of advisors, and the current rules make it almost impossible for the funds to provide that information to their members.
MACDONALD:
The changes that you're making within the super sector will not go down without some complaint. Obviously you're removing restrictions on collective charging for that financial advice. Super Consumers Australia say this is effectively fees for no service, which is obviously what we heard about in the Royal Commission. What's your response to that?
JONES:
It won't be going down that path. We want to ensure that there's legal clarity available for the arrangements that are in place today and there's not, and that was a problem identified by the Retirement Income Review. So I'm adopting that recommendation to provide legal clarity for what is happening today. But I do want to go further but I want to ensure that we do it in a way that ensures that advice that is personal and advice that is directed to a particular individual is paid for by that individual. But advice that is more general and probably looks more like information than advice can continue to be provided by the funds. There's no free source of money. It's going to be paid for by the fund in one way or another and we want to make sure that that is transparent, and we want to make sure that it is legally sound. At the moment it's not.
MACDONALD:
You're also the Assistant Treasurer. On the broader economic question do you think Australia is headed for a recession?
JONES:
I certainly hope not. We know that households are doing it tough at the moment and the fight against inflation is something that we share as a nation and every other country by the way, western country around the world, is engaged in a similar battle. But we know that –
MACDONALD:
Can you do anything more than hope?
JONES:
Well we are and that's why our budget was designed to ensure that we don't add to the inflationary pressures and it's not. It's why our wages policy is about providing some support for the lowest wage earners, the minimum wage earners through uplift in the minimum wage through the award system. It's why our budget is focused on fixing the broken supply chains, whether they're in the labour market, whether they're in product markets, whether it's investment in energy. I acknowledge, Hamish, that none of those strategies are going to have an immediate effect but we know that the inflation problem will be longer and deeper unless we address those supply site constraints that we've got at the moment.
MACDONALD:
Stephen Jones, thank you very much for your time this morning, we appreciate it.
JONES:
Good to be with you.
MACDONALD:
That's the Assistant Treasurer and the Minister for Financial Services Stephen Jones.