Questions were asked over how the big financial institutions that triggered the Hayne Royal Commission have been absolved of any liability, during debate on the Better Advice last week in the Senate.
The Better Advice bill passed last week, which had addressed many of the industry’s biggest issues including the establishment of the single disciplinary body (SBD) and termination of the Financial Adviser Standards and Ethics Authority (FASEA).
Funding of the regulatory bodies of the industry was a sticking point as the Australian Securities and Investments Commission (ASIC) levy would be left to be paid for the remaining advisers who were deemed fit and proper for the industry.
Labor Senator, Deborah O’Neill, said although the ASIC levy – which charged financial institutions to pay for investigations into the industry – was a good idea, the ones responsible for most of the bad behaviour were no longer around to pay.
“Most of the malfeasance was theirs, but they rapidly existed the market and exempted themselves from the levy,” O’Neill said.
“That left the levy to be paid by the remaining advisers, the decent ones that were still hanging around, lots of them small and medium businesses.
“Subsequently, the costs have been borne by them and have risen exponentially. This year it’s predicted to rise another 30%, and even the most diligent and careful advisers are being billed for it.”
O’Neill said the retreat of the big four banks out of the industry showed they viewed it as unprofitable without vertical integration.
“While I support a more independent network that's more agile and less dependent on big financial institutions, this move only reinforces that many financial institutions no longer see the sector as profitable without a large portion of them selling their in-house product for their profit or without corrupt and exploitative practices that were exposed during the commission,” O’Neill said.
Pauline Hanson, One Nation leader, noted the purpose of the Royal Commission was directed at the banks but the focus instead ended up on the advice sector.
“With this legislation, the government seeks to place more responsibility and liability on financial advisory services, while, under the government's national consumer credit legislation schedule one, the banks would have absolutely no responsibility if the government amendments were to proceed,” Hanson said.
“Is it because the banks make large donations to the major political parties that they are being protected? I'm only thinking out loud.”
The minister for financial services, superannuation and the digital economy, Senator Jane Hume, said: “I thank those senators who have contributed to this debate, although many of those opposite have demonstrated a profound ignorance or wilful disregard of this important industry—crocodile tears and, within the same breath, a call for even more regulation. They have conflated unadvised product failure with financial advice.
“The Morrison government is focused on cutting red tape, cutting regulatory alignment, creating regulatory alignment and reducing costs for financial advisers and financial advice businesses, which is exactly what the industry has called for.”