Despite the Coalition having oversight of the implementation of the Hayne royal commission recommendations, shadow Treasurer Tim Wilson says the reforms made advice inaccessible and pushed up fees.
Wilson told the FSC Shaping Advice Summit in Sydney on Thursday that the royal commission “might have generated some good headlines”, but it “left behind a regulatory wreckage that has made financial advice less accessible to the many”.
“The Coalition wants a framework that makes quality advice accessible and affordable again, with regulation that is stable, proportionate and focused on outcomes for consumers rather than paperwork for its own sake,” Wilson said.
“The obsession with upfront fees has not delivered better outcomes. My baseline is that, where possible, fee structures should be aligned with incentives and success, because what I actually want is best returns.”
The commission’s final report was delivered to the previous Coalition government which began implementation of those recommendations, and Wilson’s website mentions he oversaw those reforms as chair of the House Economics Committee.
Minister for Financial Services Daniel Mulino is expected to reveal the government’s policy response to the Shield and First Guardian collapse in mid-August and Wilson predicted that the Labor government will look to “deny” people from switching super funds. “That would be a very hard thing for us to support,” he said.
The government launched a consultation on the reforms earlier in the year which canvassed views on banning advice fee deductions for super switching as well as adding “cooling off” periods for switches.
Wilson said any time Labor has offered financial services reforms, it’s been to the benefit of industry funds.
“[Industry funds] have a role in a competitive market, but it is not quite the competitive market that some people would perhaps design,” Wilson said.
“Instead of a focus on designing regulation that empowers Australians, too often it’s focused on empowering a select number of funds. If you doubt that, just look at their recent adoption of the idea that those same funds will gain access to Centrelink.”
Wilson was referring to comments made to the Australian Financial Review by former Prime Minister Paul Keating, one of the architects of the compulsory superannuation system, where he suggested integrating super with Centrelink.
“Despite their boasts, these funds are not the great performers they claim to be all the time or able to meet everybody’s needs,” Wilson said.
“And they can’t provide support and advice in retirement, so their solution is to simply undermine data privacy and socialise costs in an attempt to trap Australians and their savings.”
Wilson said the Shield and First Guardian collapse was being capitalised on by industry funds to push for favourable reforms.
“A system that traps disengaged members in a product is not protection,” Wilson said. Our approach will be guided by clear principles. Wrongdoers must face consequences. Trustees and platforms must fulfil their obligations. Consumers must receive accurate information. Regulators must act early and be accountable for how they use their powers or the failure to do so.”
Wilson said the Coalition will strengthen enforcement of the laws before writing new ones and protect the right for consumers to choose to switch funds.
“We will never allow a scandal to become the pretext for entrenching incumbents and building walls around members’ money,” Wilson said.
The shadow Treasurer said financial advice reform played an important role in the Coalition’s productivity agenda, saying “advice is productivity policy”.
“Because an economy where ordinary people can access good advice is an economy where household capital is deployed more effectively, retirement outcomes are stronger and the pull on the Age Pension is also lower,” Wilson said.
Stand with small
Wilson has helped launch the “Stand with small” website to help small businesses reach the opposition with feedback.
“Because if you’re in a small business, we want to be on your side, designing laws that work for you, not what we currently have which is too many laws designed around trying to constrain or regulate big business that is then passed onto small business,” Wilson said.
The Coalition will offer small businesses (under $10 million in revenue) a $50,000 instant asset write-off, as well as consulting on a new Small Business Act.
“Some people might question what the value of a Small Business Act is, but for the self-starters of this country, they will finally have in place the architecture of economic laws that work for them,” Wilson said.
“I actually think the Small Business Act is one of the most important pillars of what we’re seeking to do and I think as people come to realise what we’re seeking to do as we step through it, they will realise how defining it will come to be.
“The point of a Small Business Act will be to press reset on the legal, regulatory and tax environment that small businesses face and to back them in hard. We are consulting on the detail of the Small Business Act and we’re very keen for your input and your ideas.”
Wilson said the aim of the act is to provide a legal framework to protect small business.
He added that right now the case has to be made to remove a regulation, but that this should be flipped around.
“We need to go back to the start, and you’ve got to make a compelling reason about why this regulation should apply to small business,” Wilson said.
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