EMMA ALBERICI, PRESENTER:
Tonight's political forum focused exclusively on the Senate Committee's call for a Royal Commission into ASIC and financial advice.
A short time ago I was joined in our Sydney studio by Labor's Stephen Jones, he's the Shadow Assistant Health Minister.
And from Melbourne by Steve Ciobo, Parliamentary Secretary to the Treasurer.
Gentlemen welcome.
CIOBO:
Good evening.
STEPHEN JONES, OPPOSITION ASSISTANT HEALTH SPOKESMAN:
Good to be with you.
ALBERICI:
Steve Ciobo, the Senate committee into ASIC, the corporate regulator, has recommended a Royal Commission into the Commonwealth Bank and ASIC and what went on with the financial planning division of the CBA. What's your view? Is that what's required?
CIOBO:
Well Emma I think there's a lot of things that have happened. We have only just received the report that came through from the Senate Committee.
We're going to have a look at the recommendations, the Finance Minister has made it clear that he takes this very seriously and wants to have a close analysis of what the report contains. But I would highlight that there is a dissenting report as well and that there are recommendations that have been put forward by Senator Bushby, a very senior member of the Senate, someone with a lot of experience in this area; and Senator Bushby doesn't support the recommendation for a Royal Commission.
Ultimately, we want what is in consumers’ best interests...
ALBERICI:
Sorry to interrupt you, but I think his was a lonely voice in the Committee.
CIOBO:
Nonetheless, you look at the validity of the arguments that have been put, rather than sheer numbers. In this particular case I think the Finance Minister has made it clear we are focused on consumer protection but we also want information and we want financial planning advice to be affordable, we want it to be accessible so we'll look at that and make a determination in due course.
ALBERICI:
Stephen Jones, is a Royal Commission the best way to get to the bottom of these issues on this program tonight we're hearing from Noami Halpern who was a victim of Timbercorp investment, lost hundreds of thousands of dollars, she's representing many in saying that we need a Royal Commission not only into the Commonwealth Bank and ASIC but broadly speaking into all financial planning relationships between banks and advisers?
JONES:
I think what the Senate committee is saying here is more needs to be known, not only into what's going on in the CBA but elsewhere. There have been a string of collapses, some of them brought on by fraud in my own area, a lot of people stung by the Trio fraud and collapse, a lot of people have lost a lot of money. We agree with the Senate committee that more needs to be known.
Whether a Royal Commission is the right way to go, I think we'll have a think about that but it is interesting to make the point that the Government's been willing to have Royal Commissions into things that happened 20 years ago and things that we all know the facts about, the pink batts issue, but not so willing to have a Royal Commission into something that happened only two years ago and everyone acknowledges on all sides of politics needs further investigation.
ALBERICI:
Steve Ciobo, to that point, a Royal Commission has been called into pink batts, into the union movement.
CIOBO:
Sure.
ALBERICI:
In this particular situation, we know more than 100,000 Australians have lost their life savings in various schemes, not only at the Commonwealth Bank but much more widespread than that. You can understand tonight investors would be thinking; why not have a very fulsome inquiry?
CIOBO:
Emma, if I'd lost money and - there have been investments where I have lost money in real estate and a range of things but if I'd lost money and felt it was a consequence of poor financial advice, of course you would be very keen to make sure it was rigorously analysed and gotten to the very bottom of; but the point is this isn't static. It's been dynamic.
There have been changes Labor's put in place, changes that have been in the form of the FoFA advice, the Government's made announcements in relation to FoFA, importantly the duty to act in a client's best interests remains.
The ban on conflicted remuneration remains so it's not as if the matter remains the way it was. Things have changed and I think that's why it's quite different to the Royal Commission in relation to the use of, for lack of a better term, slush funds by unions and why it's quite different to the tragic loss of life and of course the hundreds of homes that burnt down as a consequence the former Labor Government's bungled roll-out of the pink batts fiasco.
ALBERICI:
I guess new laws can't necessarily change cultures within regulators and that's one of the issues that came out of the Senate committee, that there was quite a worrying culture within ASIC of turning a blind eye, particularly when big institutions were involved. I think the term they used was ‘timidity’.
CIOBO:
I think a couple of things have changed with respect to ASIC. Of course ASIC has a new head in terms of Greg Medcraft and Greg Medcraft has made comments about how he's attempted to address the culture within ASIC.
But in addition to that, Emma, there's also been changes - I shouldn't say there's been changes, there is an inquiry that's taking place now in terms of the financial system inquiry and that inquiry will go towards the conduct of regulators and look at the culture within regulators and that would include ASIC.
So in many respects when it comes to the peak regulator for financial services, namely ASIC, that is already going to be the subject of an inquiry in terms of the financial system inquiry.
ALBERICI:
Stephen Jones, does Labor have faith in ASIC?
JONES:
We have significant concerns about ASIC's capacity to continue to do its job, to be a tough cop on the beat and given that in the recent Budget the Government has ripped $120 million out of its operating costs.
It's not only the Government and the Opposition that knows about this, you can imagine that all of the crooks out there, everybody who wants to have a go, will know that ASIC does not have the resources it had 12 months ago, that it has been significantly weakened at a time when there was serious questions being asked about its capacity to do its job in the first place. We do have some concerns.
That's why we agree with the Senate Committee that more inquiry needs to be done and it's up to the Government to determine whether it's a Royal Commission or some other form of inquiry that needs to be put into place here.
But we are deeply concerned about the fact that the Government on the one hand is crippling the ability of ASIC to do its job and on the other hand watering down the FoFA reforms.
ALBERICI:
So Stephen Jones, just to be clear, Labor does support a Royal Commission?
JONES:
No, I'm not saying that. I'm saying the Senate committee...
ALBERICI:
Some kind of inquiry?
JONES:
The Senate committee has made it clear that more needs to be known about what's gone on here. It's probably not just the CBA I will be a matter for us to determine.
The shadow Cabinet will make a determination on this issue but what is quite clear is more needs to be known.
ALBERICI:
Steve Ciobo if your Government is stripping $120 million from ASIC, how can you ensure proper safeguards when you're taking their resources away?
CIOBO:
I take Labor's point here with a grain of salt and Stephen Jones would do better if he did come from a Labor Party that did a couple of things.
The first, this is a Labor Party that ripped hundreds of police officers from the Federal Police and slashed funding to the Australian Federal Police.
ALBERICI:
Can we come back to the point? I'm so sorry, I'm really keen to know whether you think ASIC is appropriately, adequately resourced to cope with the issues that the Senate Committee has raised. Serious issues that go to consumer education, that go to properly regulating and safeguarding people's investments?
CIOBO:
Emma in an ideal world you'd be able to throw as much funding towards any particular regulator as the regulator thought was appropriate but unfortunately we have been elected to clean up the mess that Labor left behind. I am not for one minute going to suffer any criticism from the Australian Labor Party when they ripped funding out of the ACCC, out of the AFP, so when it comes...
ALBERICI:
Sorry to draw you back to this issue, if the financial services inquiry comes back to you and says ASIC is not properly resourced, you leave the door open, surely, to put more money into it.
CIOBO:
We would need to have a look at that and you make the point I wanted to make earlier which is simply the culture of the regulator and the ability of the regulator will be assessed by the financial system inquiry so rather than crystal ball gaze about what might happen, I think let's let the financial system inquiry do its work but in the interim I think the Labor Party should be very careful about people in glass houses throwing stones because frankly Labor has no credibility on this.
ALBERICI:
We're going to move on from this shortly but it took the watchdog ASIC 16 months to respond to a tip-off about the Commonwealth Bank. Stephen Jones, this happened under Labor's watch. How did this culture of timidity at ASIC when it came to the big guys, the big banks and financial intuitions, how did that culture develop?
JONES:
We're as critical of this as the new chairman has been of the inability of ASIC to get on top of what was brought to its attention, not for the first time. We do have some criticisms and deep concerns about that.
The way to address it is not by ripping $120 million out of their operating costs, it's not to try and brush it under the carpet and certainly not to water down the financial advice protection laws that were put in place in response to some of the big collapses and big frauds that occurred and that's exactly what the Government is trying to do.
CIOBO:
I see you're not immune to scare mongering, Steve.
JONES:
What the Government is clearly doing is watering down the provisions which protect it against conflicted commissions...
CIOBO:
Completely untrue. That's untrue.
JONES:
And protect it against financial advisers not acting in the best interests of their clients.
ALBERICI:
Steve Ciobo, one of your first acts in Government was to water down the loss known as FoFA, the Future of Financial Advice laws which Labor brought in. How can you justify that now given what we've seen from the Senate committee and what's been revealed about the behaviour at the Commonwealth Bank?
CIOBO:
Well Emma the assertion in your question is false. We're not watering anything down and in fact ABC Fact Check, when the Labor Party gets out there on an almost daily basis and says it is being watered down, the ABC Fact Check made the point that it is scaremongering, so it's not true.
What we are doing though is improving it. Because the thing is Labor put in a regime that had so much red tape, so much compliance that all they were really succeeding in doing in many respects was putting so much compliance burden back on the industry that they were making financial advice unaffordable and inaccessible.
What we're doing is keeping in place all of the protections, the duty to act in the best interests of consumers; that remains. The ban on conflicted remuneration; that remains. What we're doing is getting rid of some of the red tape that so financial advice actually becomes more accessible and more affordable and that is good for consumers.
JONES:
The problem with the Liberal Party is they don't know the difference between red tape and a guard rail. All of the provisions that Steve has identified have been significantly watered down.
CIOBO:
That is untrue.
JONES:
That is what the Minister is going out there and telling the financial advice industry at the moment.
CIOBO:
You are scaremongering and you should stop.
JONES: If it is not true... if it is not true why is your minister...
ALBERICI:
In what way has it effectively been watered down in your view?
JONES:
The best interests of the client test has effectively been turned into a tick-a-box exercise, a desktop tick-a-box exercise.
ALBERICI:
The boxes that are being ticked are to make sure the adviser is working in the client's best interests.
JONES:
They watered down the legal obligation on the financial adviser to act in the best interest of their client. They watered down the provisions which require...
CIOBO:
Simply saying it over and over again Stephen doesn’t make it true.
JONES:
…ban the conflicted remuneration. It was working well. It was working well. It was introduced as a result of thousands and thousands of ordinary Australians losing their life savings because of the dodgy decisions of financial advisers or financial advisers failing to act in a careful way and in my own electorate there are literally hundreds and hundreds of them so I have quite some background and information in this.
For Steve to sit there and say we are not watering them down is simply not true. Your own Minister is out there bragging to the industry that we've responded to your concerns.
CIOBO:
Correct.
ALBERICI:
One last one on this.
ALBERICI: Steve Ciobo, on this very program Matthew Rowe, chairman of the Financial Planning Association, said your changes when it came to general advice and allowing commissions to remain when it came to general advice was a retrograde step?
CIOBO:
Well, Emma, I know the financial planning association has come out since we made our announcement in relation to the changes last week and is supportive of the changes we're making. Emma I also want to make a key point, Labor would not know about the negative consequences of their overly burdensome FoFA laws because unfortunately when you make financial advice inaccessible, when you make financial advice unaffordable, you don't hear from the consumers who can no longer get access to advice. But we did hear.
ALBERICI:
You want the advice to be robust I guess is the bottom line.
CIOBO:
Of course.
ALBERICI:
On that point, just to clarify, you have gone back a step and not allowed commissions, not even for general advice?
CIOBO:
The ban on conflicted remuneration remains in place, Emma. As does the duty to act...
ALBERICI:
Even on general advice?
CIOBO:
There are specific regulations that will apply in relation to general advice.
ALBERICI:
Just clarify for us, in a bank, when a bank staff member sells a bank's products, the bank can remunerate that staff member with a commission?
CIOBO:
There cannot be conflicted remuneration in the example of a bank teller providing that advice. That's one of the changes being put in place. It's an important change but as I said when it comes to consumer protections overall, all of the laws remain but we are getting rid of some of the compliance burden so the that the consequence is more people get financial advice and that's a good thing.
ALBERICI:
We have to leave it there. Steve Ciobo and Stephen Jones, thank you very much.
CIOBO:
Thank you Emma
JONES:
Cheers.