Finance Minister Senator Mathias Cormann. Photo: Alex EllinghausenThe Abbott government has rescued its financial advice laws thanks to an eleventh-hour deal with the Palmer United Party, but the changes have drawn harsh criticism for increasing red tape and diminishing the rights of investors.
The regulations will allow financial planners associated with banks to receive so-called conflicted remuneration, such as payments from product providers, in limited circumstances.
Finance Minister Mathias Cormann revealed in the Senate that the government had agreed with the balance-of-power senators to introduce further protections as a condition of their support for the unravelling of changes made under the previous Labor government.
It capped a tumultuous few days during which Labor tabled the government’s reforms against its wishes and Clive Palmer said negotiations with the Coalition were not taking place when they obviously were.
The deal, first reported by Fairfax Media on Tuesday, caught Labor and the Greens by surprise and saw them attempt to block the changes with a motion of disallowance in the Senate.
The final Senate vote of 31-34 for disallowance meant the attempt to strike down the changes failed.
Labor had argued its Future of Financial Advice reforms were aimed at stopping the kind of fraud that ruined the retirement plans of investors who sought the advice of the Commonwealth Bank’s financial services arm and lost their life savings.
In a letter from Senator Cormann to Mr Palmer, the government agreed to:
■ Require financial advisers to act in the best interest of their client and prioritise their client’s interests ahead of their own.
■ Require advisers to disclose to clients any payments they receive from product providers.
■ Give clients the right to return financial products under a 14-day cooling-off period.
■ Allow clients the right to change instructions to their adviser if they experience a change in their circumstances.
The regulations also specify that any instructions to alter or review instructions must be in writing, signed by the client, and acknowledged by the client.
The government has also agreed to establish an “enhanced public register” of financial advisers, including employee advisers, which includes a record of each adviser’s credentials and status in the industry.
Labor senator Sam Dastyari was scathing of the last-minute deal, saying it must be embarrassing for the Coalition to have its regulations written by Mr Palmer.
Mr Palmer said a commonsense approach had prevailed and he always had the best interests of Australians at heart.
The chief executive of National Seniors, Michael O’Neill, said the deal would do nothing to help investors or fix problems in the industry.
“On the surface it adds nothing to the issue at all, except potentially another layer of red tape, which was the reason why the government made its changes to start with.”
But John Brogden, the head of the Financial Services Council, said the amended regulations would make financial advice more accessible and affordable.
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