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.”
Trying to pin the blame on financial advisers will just strengthen their argument to allow Trustees to employ graduates (or worse) to pump out cookie cutter intrafund advice.
Where is the response from the FAAA? They seem to have no problem at all with Senator O’Neill’s comments.
After reporting a risk only financial planning firm recently for bad advice and poor compliance, ASIC responded that it wasn’t on their agenda and since no one had lost money (yet) they would put it on their record in case it’s required in the future, but chose not to pursue it now as it wasn’t part of their current agenda. Hmmm… I wonder where the problem lies.
ALP have treated advisers with pure contempt since coming to office.
Everything they have done has been farcical. (Except if you are friends with the party of course).
Disgusting. ALP out.
Leave the smearing of advisers to us lot. We’re quick to point fingers and never heard of glass houses.
Corrupt Canberra all pointing fingers everywhere else.
– ASIC are basically useless and don’t regulate MIS.
– Hume cancels Dodgy Dixons MIS fiasco senate enquiry as it happened significantly on HER watch.
– Conaghan / LNP trying to blame ALP when the LNP gave Advisers the worst 9 years ever from Frydenberg, O’Dwyer and Hume.
– Jones the HOT MESS adviser over regulation fixer only increased the HOT MESS of Red Tape and has given Advisers the most disgusting legislation ever, CSLR.
– O’Neill and ALP trying to point fingers elsewhere, of course it’s always the Financial Advisers only fault.
Can Corrupt, Useless, Self Interested Canberra get any worse?
Yes – DBFO II.
Collectively charged complex advice, single product APL, delivered by inexperienced advisers with very low education standards.
You watch. DBFO II will be one of the worst pieces of legislation which will deliver a massive win to Trustees at the expense of fully qualified advisers.
We will have two-tiers of advice, where one is light touch low compliance and professional advice hamstrung by even more red tape and accountable for everything.
Cannot wait to see the value of my Masters Degree go in the bin when this legislation passes.
Actually, we have a bunch of politicians from both sides who don’t know what they are talking about. I guess it was only a matter of time before this mess turned political. Don’t hold your breath for real solutions..