Opposition warns against ‘regulating for the evil of the 2 per cent’

Shadow Minister for Financial Services Kevin Hogan has cautioned against an over-zealous regulatory response to the collapse of the Shield and First Guardian managed investment schemes, telling an industry conference that “regulating for the evil of the 2 per cent” can have severe unintended consequences for the 98 per cent who do nothing wrong.

Hogan told the SIAA National Conference in Melbourne on Wednesday “there were obviously criminals who were operating in the sector, and criminals often are very smart people, so they’re going to be looking to do what they do anyway”.

“You had criminals at one end and lead agencies… who were doing what they were doing; there was maybe a very small section of financial planners who were involved; but then we go down to the platform, to the rating agencies, to… the customer, and ASIC have to be involved in that as well.

“When we regulate, we’re regulating for the evil of the 2 per cent but we’ve got to be very cautious we don’t damage the other 98 per cent and make it too expensive and too complicated, and… with financial planners, we have [fewer of them] because of this very reason.”

The number of financial advisers has fallen from a high of around 29,000 to just over 15,000, a decline Hogan said he had not fully appreciated before taking on the shadow portfolio in March this year.

“What I’m acutely aware of is we have the situation when people are getting to the stage where they’re starting to approach retirement and they’re starting to really focus on their balance or their superannuation fund is when they’re looking for advice, and at the moment I’m getting the feedback that it is not easy to get that advice,” he said.

“That’s a huge problem and that’s something that we need to address. I think these reforms, [or] whatever reforms happen, should be trying to overcome that big obstacle. We hear a lot of people, they’re now going, well, I’ll ask AI – how we all love AI – but these people need good financial advice from people they can trust and organisations they can trust as well, without having to Google it.”

Hogan said SMSFs should be included in the Compensation Scheme of Last Resort. Hogan himself is an SMSF trustee and member.

“I don’t think they should be excluded. That being said, there’s different models of how they would be included, and there’s certainly the point that maybe you don’t want them to get double charged either, or pay a double fee, with the way that may or may not work,” he said.

Hogan said he has had “a couple of chats with Minister for Financial Services Daniel Mulino about this” but the opposition has yet to settle on a firm position.

“[It’s] early days at the moment, as you know, with how we’ll, we’ll not early days, but obviously the decision has yet not yet been made, and the final position hasn’t been landed.”

Hogan said the Coalition would hold the government to a commitment by former minister Stephen Jones to implement education standard reforms in 2026

“I will keep the government’s feet to the fire,” he said.

Hogan said the industry accepted the need for better educational standards but re-iterated his view that the regime should be looser.

“I still think we can loosen that because, again, we lost some good financial planners when those reforms were made. I believe, and I’m university educated, [that] on-the-job training is far more valuable, and I think we learn a lot more from that.”

Whatever legislative proposals the opposition takes to the next election, “we need to keep it simple and as cheap [as possible] and cover those 2 per cent of illegal people as best we can, but I like people being able to be flexible, having choice with how they’re managing their funds or their money or their super”.

“It should be easy, I think, that people can move, change, decide something different depending on where they are in their stages of life, so that’s how I’ll always be approaching it, politically, philosophically and legislatively as well.”