Good morning, everyone — thank you so much for welcoming me to your conference today.
Good financial advice has always been a valuable commodity.
In decades past, people seeking advice might have gone to their bank manager, their solicitor, or maybe the uncle or aunt in the family who was the most financially savvy.
Today, people have more wealth and more choices. They are living longer and aspiring to even greater things.
And as a result, the complexity of advice is dramatically increasing — and has increased particularly in the seventy-or-so years since the AFA was created.
Today financial advice is a complex and multi-layered profession that includes specialist streams in superannuation, tax, estate planning and life risk management, with more than 25,000 people working in the industry.
And, to add another dimension, technology is creating new opportunities — and new challenges — on an almost daily basis.
Along this journey the acts of some rogue financial planners, as well as some financial institutions, have damaged the wider profession's reputation.
It is up to the financial advice profession to restore that trust and to rebuild the industry's reputation in the community.
To do this, financial advisers will not only need to have the necessary technical and strategic skills, but also the ethical awareness required to provide outcomes for consumers that are in their best interests.
Financial advice is no longer just an occupation — it is now a profession. And it is a profession that can, and must, give Australians the confidence to seek advice, to help them secure their future.
Professionalising financial advice
That said, for an occupation to be truly regarded as a 'profession' the broader community must believe it to be so.
And that, ultimately, depends on whether there is trust, confidence and respect — all of which have been undermined by the scandals of recent times.
The financial advice industry has, as all of us here know, taken a battering because of the actions of an unscrupulous minority.
And it's up to industry, together with government, to lift the bar. To put the right settings in place to ensure more Australians can access high quality advice helping them to achieve their financial goals.
At the heart of everything the Turnbull Government is doing in financial services is our desire to improve the consumer experience.
Consumers need to have confidence in the products they are investing in and that the advice they are receiving is conflict free and in their best interests.
They need to know that the regulator is monitoring the market and able to intervene if needed. And if things go wrong, they have a path to remedy and compensation.
So let me take you through some steps the Turnbull Government is taking to achieve that.
The first is raising the education, training and ethical standards of financial advisers.
As you will all be aware, from 1 January 2019, new financial advisers will require a degree while existing advisers will have until 1 January 2024 to meet a standard equivalent to a degree.
Of course, the Government has consulted closely with the industry, consumer groups and individual advisers.
We've made sure the new requirements have a high degree of flexibility, and are achievable for those already in the industry. We understand that existing advisers will need to balance further education requirements with the demands of continuing to provide high-quality financial advice to their clients.
I am confident these changes will make a positive difference — both for advisers and their clients.
The new Financial Adviser Standards and Ethics Authority is also progressing well.
This authority is responsible for establishing and administering the professional standards — in effect, giving life to the Government's reforms.
The Board has been meeting frequently and its members are working hard to give stakeholders — both advisers and licensees — certainty on the new standards.
They are conscious, in the same way that the Government is, that there needs to be sufficient time to prepare for the changes.
The Government strongly believes in professionalising your industry because of the important role it plays in the lives of the millions of Australians who rely on your advice, to help secure their economic prosperity.
And these changes will sit alongside our ongoing efforts to improve the financial literacy of all Australians.
This is critically important. Doing so has a positive impact on the wellbeing of individuals, families, and communities right across Australia.
Today, almost every Australian holds one or more financial products.
For instance, 3.2 million Australian households have a mortgage over the family home; 7.5 million Australians have a credit card; and 13.9 million working-age Australians have life insurance.
So, clearly, improved financial literacy can benefit people at all life stages. And that can take many forms.
It might be making more informed financial decisions.
It might be managing money better.
It might be planning for the future.
The Government is a firm believer in boosting the knowledge, skills and behaviours of Australians. And our drive to do this is being led by ASIC and its wide-ranging list of programs.
Let me, briefly, unpack two of them.
The first is the National Financial Literacy Strategy.
This is a flexible framework that encourages and guides stakeholders who are interested in improving financial literacy.
So, to put it simply, ASIC works with organisations from the government, business, education and community sectors to get initiatives off the ground.
And it's proving a success.
Right now, we've got more than 50 organisations supporting or contributing to around 80 initiatives.
The Smith Family, for instance, has put together a Certificate I short course — one based on ANZ's MoneyMinded program — that is helping young teenagers in disadvantaged schools.
There is also the Salvation Army's 'You're the Boss' workshops — multi-session financial education programs that have already helped thousands of Australians right along the east coast.
We also have the ATO's 'Tax, Super and You' website, which is packed with resources for individuals, teachers and students on what can be a very tricky area.
Importantly, ASIC will shortly begin a consultation process to refine and update the national strategy for 2018. So I encourage you all to be involved in that process.
The second program I'll mention is ASIC's MoneySmart Teaching program.
This is building the capability of teachers across the country so that they can provide financial capability education in primary and secondary classrooms.
With numerous resources on offer — as well as targeted professional development — the latest count revealed almost 7,000 schools have been involved, and more than 30,000 teachers.
In fact, the numbers have been so encouraging that in July I announced a new National Partnership Agreement to support the program.
We're currently working with the states and territories on this agreement, with a particular focus on bedding down more ambitious professional development targets.
Australian Financial Complaints Authority:
Another important step the Government is taking in our effort to boost confidence and trust is legislating to establish the Australian Financial Complaints Authority, known as AFCA.
AFCA will be a one-stop-shop for all financial disputes — including superannuation — and will replace the Financial Ombudsman Service, the Credit and Investments Ombudsman, and the Superannuation Complaints Tribunal.
As it stands, having multiple schemes which compete with each other — and have overlapping jurisdictions — creates extra costs for industry and the regulator, and creates confusion for consumers.
AFCA will eliminate this duplication and address consumer confusion over which scheme is the appropriate one for particular complaints, and will combine the strengths of both a statutory tribunal and an industry ombudsman scheme.
Most importantly, it will give consumers and small businesses confidence that they can access a speedy — and free — dispute resolution service, with compensation in appropriate circumstances.
This is a game changer. When it commences on 1 July next year, it will be industry-funded and all financial firms that deal with consumers — including superannuation funds — will be required to be members of AFCA.
AFCA will also be subject to an enhanced accountability regime to ensure that it is accountable to its users and members; and it will face strengthened ASIC oversight, including an independent assessor and regular independent reviews. Additionally, AFCA will be guided by a board comprising an independent chair and equal numbers of directors with industry and consumer backgrounds.
I will be appointing an initial minority of the board — including the independent chair — to make sure it has the necessary skills and expertise, and is able to appropriately balance the needs of member firms and consumers.
Finally, to ensure AFCA is accountable for the fees it charges to members, it will be required to report to the responsible minister annually on any decisions to vary fees as a condition of authorisation.
New powers and obligations:
The last step I would like to highlight is the introduction of new obligations around the issuance and distribution of financial products, and new regulatory powers for ASIC.
First, the Government has committed to creating new design and distribution obligations for both issuers and distributers of financial products.
In line with global moves, the Government believes that product issuers and distributors should be required to target the distribution of their products — ensuring they are not inappropriately marketed to those consumers for which they would be unsuitable.
And second, where risky and unsuitable products do make it to market, ASIC should be empowered to step in to protect consumers, through a product intervention power.
This will allow ASIC to intervene in and ban the distribution of financial and credit products if the regulator believes the product is likely to cause 'significant consumer detriment.'
And what I mean by that is detriment or harm to consumers that might be caused by a product's features or its method of distribution.
ASIC will be empowered to take various steps in relation to a product, including:
- amending product marketing and disclosure materials;
- imposing consumer warmings and labelling changes;
- restricting how a product is distributed; and
- banning products, if the circumstances require it.
Both the design and distribution obligations and the product intervention power are measures that respond to recommendations made by the Financial System Inquiry, and are aimed at providing additional, non-disclosure-based protections for consumers, while at the same time being flexible enough to allow industry to continue to innovate.
It will give ASIC greater power and responsibility. It is, without doubt, a significant boost to the commission's enforcement toolkit.
While similar powers exist in the UK, European Union and Hong Kong, the Government recognises that this will be a significant change for Australia.
That's why the Government has been very conscious of the need to allow flexibility for ASIC to intervene where there is risk to consumers, while at the same time giving industry certainty about when the power will be used.
To strike the right balance, the Government will introduce strong accountability measures so that ASIC is held to account by all stakeholders — including industry and the Government — for an intervention.
What's more, we are confident that a rigorous process will encourage ASIC to use the power only when there are no other suitable regulatory options available to it.
The Government intends to release draft legislation for consultation in the coming months, and I encourage all of you to share your thoughts and ideas as we move ahead.
So, to finish, let me reiterate that your industry is undergoing a period of significant and ground-breaking change.
The financial landscape is more complex — and the expectations far greater — than ever before.
You are the partners with millions of Australians in building their wealth, in establishing and expanding their business and in giving them choices when they retire.
That is why we must lift the bar higher.
We must give Australians confidence and restore their trust in this critical industry. And, in doing so, we must give financial advice the credit it deserves as a profession.
To this end I am proud that this Government has instituted reforms to raise standards of financial advisers — professionally, ethically and educationally.
It is my ambition as minister to set the course toward making it a universally respected, important and desirable profession.
I want to see all Australians have the confidence to seek financial advice to help them secure their prosperity.
So thank you, once again, for welcoming me today. I wish you all the best for the rest of the conference, and I look forward to seeing you again soon.
 McMaster cited in Cull, M 2009, 'The rise of the financial planning industry', Australasian Accounting Business and Finance Journal, 3(1).