The Opposition has called for a Senate inquiry into financial advice, focusing on the Commonwealth Bank of Australia and its executives, and has called on the Government to table its proposed regulations for the Future of Financial Advice reforms to allow the Senate to vote on them as soon as possible, to bring certainty to regulation of the financial planning sector.
At a press conference in Sydney this morning the Leader of the Opposition, Bill Shorten, said questions need to be answered by the bank about why unethical financial planners employed in Commonwealth Financial Planning (CFPL) were not disciplined and were actually promoted. The inquiry should examine further the performance of the Australian Securities and Investments Commission (ASIC) and whether stronger laws are necessary. Shorten said the inquiry would also examine the implications of watering down the consumer protection provisions of the Future of Financial Advice (FoFA) laws in light of what took place at CBA.
“This is not just about the Commonwealth Bank. It’s about the investments and savings and confidence that consumers can have…in the provision of financial advice,” Shorten said.
“It’s about recognising there are good financial planners trying to do their very best for their customers, yet their reputation is being tarnished by the actions of some.”
COMMENT: In regulation and compensation, remember the ‘services’ bit in ‘financial services’
Cormann responds
In response to Labor’s call, the Minister for Finance, Senator Mathias Cormann, said the government remains “focused on good public policy in relation to financial services regulation and on the best possible approach to resolve legitimate outstanding and unresolved issues for aggrieved CBA customers”.
On the other hand, “Bill Shorten and Labor are focused on opportunistic politics,” Cormann said.
“The Senate is in charge of its own destiny and can always set up any inquiry into any matter it sees fit.
“Government senators will of course always constructively participate in any Senate inquiry.
“In the meantime the Government will continue to work with all stakeholders to lift professional, ethical and educational standards across the financial services sector.”
“We will continue to work to ensure we have a robust but efficient regulatory system for financial services in place, which is competitively neutral and where people saving for their retirement or managing financial risks through life can access high quality advice they can trust and which is also affordable,” Cormann said.
Different inquiries
The Shadow Treasurer, Chris Bowen, said a new inquiry was warranted and suggestions that further reviews of the financial planning sector could be referred to the Financial System Inquiry (FSI) were “a cop out”.
“The terms of reference are very different,” Bowen said.
“It’s about the structure of the financial series industry. It’s about very different matters. Secondly, submissions have closed. The Government says people can go to the Financial Services Inquiry, but submissions have closed. And thirdly, objectively, on any objective or reasonable test, the chair of the Financial System Inquiry is former chief executive of the Commonwealth Bank.”
“Even on issues of perception, that is not an appropriate place to have these matters examined,” Bowen said.
Have their say
Bowen said Labor would work with other parties in the Senate to “make sure the victims of the Commonwealth Bank scandal and other scandals can have their say on what should happen next, what should happen going forward, and how the Government, and others, should deal with this mess”.
Bowen called on Cormann to table the Government’s FoFA regulations as soon as possible so the Senate can vote on them and the process of bringing certainty to the sector can continue.
Bowen said Cormann had “secretly” promulgated new regulations, did not issue a press release, sent the regulations to the Governor General, and “now is required to table them before the Senate, which he refuses to do”.
“Yesterday, the Labor Party did his job for him.”
Bowen said the Opposition had sought leave to table the regulations and had been refused.
He said a “dodgy process” of amending FoFA had begun under the former Assistant Treasurer, Arthur Sinodinos, and had been continued by Cormann.
“The financial planning industry deserves certainty,” Bowen said. ”
“The Senate will vote on these regulations. Mathias Cormann can run but he can’t hide. If they don’t vote on them this week, they’ll vote on them next week. It’s better for the industry to have the certainly of them having been voted on this week. And it’s better for the victims of financial scandals to know they have the peace of mind that the Government’s outrageous attempt to water down the Future of Financial Advice laws has been defeated on the floor of the Senate.”
Stronger consumer protection needed
The Shadow Minister for Financial Services and Superannuation, Bernie Ripoll, said the evidence was “clear” that stronger consumer protection was needed in the area of financial planning. He said the Government should be looking at “strengthening, not weakening and wrecking” the original FoFA reforms.
He said the Opposition wanted to “resolve these matters and give certainty back to the sector”.
Financial planners and financial planning businesses “need certainty to go forward”.
“The Government should stop hiding and running away, table the regulations and allow the Senate to do its job,” he said.
Shorten said claims by Cormann that the then-Labor government had granted special exemptions to industry superannuation funds were “just wrong”. He said if Cormann wanted a debate about watering down FoFA laws he should table the proposed regulations and let the debate take place.
Scheme inadequate
Shorten said a new inquiry was necessary because the compensation scheme proposed by CBA to remediate clients affected by poor advice was inadequate. He said a scheme that required any client who thought they might be affected “to find the bank” was unacceptable and rejected claims the CBA could not identify clients who had been affected.
“If Commonwealth Bank had overpaid you in your bank account, do you think they could find you?” he said.
Additional reporting by Glenn Freeman
