‘Smearing advisers won’t fix broken laws’: Opposition hits out at Labor blame game

As the Shield and First Guardian failures threaten around $1.1 billion of investor funds, shadow financial services minister Pat Conaghan said the government is facing pressure over the way it has handled the debacle and is trying to shift the blame.

“Labor can’t run forever. Smearing advisers won’t fix broken laws. We need targeted action against fraudsters, their business models and the loopholes they exploit,” Conaghan said.

“But on Thursday, we saw the same old Labor, and I fear all they’ll offer is more ideologically driven red tape that hurts legitimate businesses while doing nothing to protect consumers.”

In a parliamentary committee hearing last week, O’Neill clashed with ASIC chair Joe Longo and deputy chair Sarah Court over financial advisers, with the senator suggesting the profession has “too much free reign”.

She further argued that too many advisers are “ripping off their fellow Australians”.

“There’s a lot of talk about financial advisers and they put a lot of effort into talking to all of us. And there is an assumption that they are professionals and that they will do the right thing,” O’Neill said, while Longo urged the senator not to “demonise all advisers”.

In response, she said: “There is enough there to be concerning.”

According to Conaghan, ASIC’s characterisation of the role that financial advisers played in the Shield and First Guardian scandal as a minority of operators exploiting legal loopholes, and the broader advice industry, is not to blame.

“On Thursday, we saw ASIC chair Joe Longo forced to remind Labor senators that Australia is governed by the rule of law,” Conaghan said.

Also during the hearing last Thursday, Liberal senator Jane Hume pushed that there was an “awful lot of structural gaps” involved in the failures.

“We’ve got lead generators. We’ve got super switching and hawking. We’ve got weak MIS oversight. We’ve got losses in Shield, First Guardian and Lion as well that are now driving up the Compensation Scheme of Last Resort claims well beyond Treasury’s initial estimates,” Hume said.

“It’s entirely unsustainable because it is only one component of the financial advice sector that is sustaining the Compensation Scheme of Last Resort even though we’ve got platforms, investment providers, research houses, MIS and the auditors. We haven’t even spoken about auditors yet. All of them are involved in this process.

“It seems to be that it’s just the financial advisers – who are kind of at the end of the chain here – that are going to end up picking up the tab. That’s good financial advisers paying for the bad behaviour of a few.”

However, as chair of the Senate economics references committee, Hume shuttered the inquiry into Dixon Advisory and wealth management companies more broadly after it lapsed at the end of the last Parliament.

According to Conaghan, Labor “knew about these regulatory gaps”.

“Now they’re scrambling, trying to pin this mess on anyone else to cover their own inaction,” the shadow minister said.

He added: “It’s clear from their aggressive questioning Labor already knew Longo wasn’t going to seek another term.

“Labor is clearly trying to find anyone or anything to put the blame on because they know they’re exposed. They’ve sat on reviews, ignored warnings and failed to act.”

Earlier this month, Conaghan accused the government of deliberately burying its own report into managed investment schemes (MIS).

“Billions of dollars of everyday Australians’ retirement savings are now at risk, lost in the collapse of dodgy schemes like First Guardian and Shield, all of them so-called managed investment schemes,” he said.

“What were the recommendations? Could implementing those recommendations have protected these investors? Could they have protected hard-working Australians who have done the right thing and now have lost everything? We simply don’t know because this government has bizarrely buried its own report.

“The government should be providing answers to everyday Australians, but, once again, Labor are asleep at the wheel.”