ROSS GREENWOOD:
Well, in the past, Assistant Treasurer Stephen Jones has called Australia's financial advice industry a hot mess. To be honest, I've called it even worse today. Stephen Jones gave the government's response to a review of the financial advice industry by Michelle Levy and will accept 14 of her 22 recommendations. This includes replacing statements of advice with something more fit for purpose, removing uncertainty and unnecessary paperwork by streamlining consent requirements, removing so‑called safe harbour steps, including identifying objectives, needs, the financial situation of a client and clarifying the rules on conflicted remuneration and improving transparency where advisors receive commissions on products. The Assistant Treasurer, Stephen Jones joins me now from Canberra. Stephen, always good to chat to you. Can I first, before we get to these recommendations and your response, can I get you to respond to what Alan Oster was talking there about the economy, about the prospect of more interest rate rises and all the heightened risk of recession in Australia right now?
STEPHEN JONES:
There's no doubt, Ross, that the international factors, as the international economy and our major trading partners start to slow, and those interest rates, which we haven't yet felt the full effect of, as Alan was saying, they haven't started to bite. So, we're obviously keeping a close eye on the numbers and we hope we can walk that narrow path. But there's no doubt, there's no doubt that the Reserve Bank's strategy of attempting to slow consumption is having an impact and is having impact on growth.
GREENWOOD:
Yeah, we'll get to that, no doubt down the track. But one thing in regards to your response to Michelle Levy's recommendations, 14 of 22, but in particular trying to really link financial advice in the future to superannuation funds. Does that leave some people out of the mix, do you think? Or does that include every Australian who needs advice, because we can see with scams, people are really, if you like, getting either the wrong advice or going in the wrong directions.
JONES:
Yeah, dead right. So, three jobs at work and it's about trying to chunk it down into what's urgent, where are the burning decks? What can we move on quickly that's not controversial? Even if something might be a bit controversial, if it's urgent, we need to do it. Let's move on that quickly as well. And then what's in the not‑as‑urgent and can wait a little bit, but we'll consider it pile. So, three chunks of work, mate. The first is dealing with a profession. You've run through the list of things, what are they all about? They're essentially about removing the red tape and regulation that is supposed to be providing consumers with protection, but it doesn't. It's done in the name of protecting consumers from good advice, but actually‑ sorry, protecting consumers from bad advice, but actually what it's doing is protecting them from getting access to the good advice that they often need. So, that's the first bit. The second bit is about dealing with the fact that we've got 5 million Australians who are either at, or approaching retirement. Thanks to superannuation, they've got more savings than they've ever had in our nation's history, average $200,000 in retirement now, as you hit retirement. They're still going to have a necessary interface with the pension system. It can be complex and confusing. They need to get some basic advice to help them work their way through that. They go to their superannuation funds and they ask them for information and advice and the funds throw their hands up and say, sorry we can't help you. So, it's about dealing with those issues and ensuring we can have a safe environment for funds to be able to provide that advice. I think that's urgent as well. So, professional advisors, superannuation funds, that's pillar one and pillar two of the work. Pillar three is everything else and we'll work through that in a consultative and workman‑like fashion. But I'm not putting it in the burning decks must‑do‑immediately category. I'm putting it in the let's hasten slowly and carefully consider that one. Necessary jobs at work mate.
GREENWOOD:
That's right. Superannuation and not banks. Why not banks?
JONES:
Well, good reason. It's about retirement income being a priority and the banks have all got out of the super and the retirement income game over the last five years, in large part in response to the Hayne stuff. So, they've vacated that territory, it's now the superannuation sector. They already ‑ It's actually a safer environment because they already have a best financial interest obligation in relation to all of their members of their funds. It's where people are going to for retirement income advice. So, I think if we deal with that first, we'll probably end up sorting about 80% of the issue and then I can turn my mind to the 20% of the issue, which will be about what people need to get from banks and what people need to get from their insurance companies, if at all. So, I think by dealing with superannuation funds, that's about 80% of the issue at the moment.
GREENWOOD:
Is there one issue here, an argument here, that actually that transition to retirement is simply too complicated, that there are too many rules, too many complexities? That's the reason why the people need the advice. There is no smooth transition into retirement.
JONES:
Yeah, fair point, Ross. We have ‑ It's a product of one of the most ‑ we have a very targeted pension system, so we have both an income test and an assets test, very targeted to ensure that people who don't need the pension don't get it and that it tapers off as people have more income and more assets at their disposal. The correlative of that is that if you do have savings, then the relationship between your private savings and private pension and the government‑provided pension can be complex and you need to work through that. And for most Australians, they'll need help and assistance and information and advice to do that, and we want to help them get there.
GREENWOOD:
Is it also that situation where you've talked about before and the objectives of superannuation? The objective of superannuation is not to leave bequests. In other words, to run down that superannuation fund before death. But the problem is, you don't kind of know when you're going to die. Am I gonna die at 82 or 102? I need enough money to see my way out right? So that's part of the problem.
JONES:
Yeah, that's true. That's very true. And if people are making that decision consciously, then well be it. We don't tell people what to do with the money that they're saved. That's their money. But if they're making those decisions because they don't have all the information and assistance they need to make good, rational, sound decisions, then we want to help them do that. And I'll give you one example. An extraordinary number of people over the age of 65, who aren't working anymore, have still got their savings in accumulation phase, which means the money and the earnings are attracting‑ or the earnings are attracting a 15% tax rate. If they flip that over into pension phase, it'll be attracting 0%. Extraordinary number of people haven't made that basic decision, probably because they don't know about it.
GREENWOOD:
And that's probably why they need the advice. It's very good.
JONES:
It's good for the government, but exactly. It's spot on.
GREENWOOD:
Exactly. Steven, I've got to leave it there. We'll chat soon. Many thanks for your time today.
JONES:
Always good to talk mate.