18 February 2017
Transcript - #2017004, 2017

Interview with David Koch, Talking Lifestyle, 2UE

SUBJECTS: Professional standards

DAVID KOCH:

Minister, thanks for joining us.

KELLY O'DWYER:

Great to be with you Kochie.

DAVID KOCH:

Now, what are you introducing here?

KELLY O'DWYER:

So what we're introducing is, in essence, higher standards for financial advisers. People would be pretty shocked, probably, to learn that there are some people who can hang up their shingles as a financial adviser, so that person could be entrusted with your retirement savings or giving you advice on how to set up your business and run it, with only four days' worth of training.

DAVID KOCH:

Four days?

KELLY O'DWYER:

Four days. And frankly, we don't think that standard is nearly high enough. We think it's absolutely critical that advisers have the highest possible standards because they're entrusted with some of the biggest issues that people are actually dealing with in their lives. And so you need to have compulsory education requirements, not only for new financial advisers coming into the industry, but also for the existing advisers who are currently in the industry. You need to make sure that there is better supervision of those advisers, particularly if there are some advisers engaging in poor practices. You need to have proper ethics for these advisers, just as we've had in the accounting professions and the legal professions. We need to have the same thing for financial advisers. And need to make sure that at a bare minimum, everybody meets a certain benchmark so everybody must submit to an exam that means that if you go to a financial adviser, you know that they have met that benchmark. And finally, we need to make sure that financial advisers continue to keep their education and their knowledge current through a requirement to have continuous professional development.

DAVID KOCH:

So it really is like what accountants do and what lawyers do right? Which is fair enough, because while an accountant might do your tax return and the like and a lawyer might do a legal issue, when you go to a financial adviser, you're laying your entire wealth, financial possibilities and hopes and dreams bare to them and leaving it in their hands.

KELLY O'DWYER:

Well you are, and more than that, you're entrusting them with the responsibilities, you've got children and grandchildren. I mean it has a flow on impact for the entire family so it is critical that we actually have the highest standards. For the legal profession, the accounting profession, these requirements have developed over hundreds of years. But we know that there is a critical and urgent need to lift the standards here for financial advisers. We don't have hundreds of years, we have a matter of years in which to be able to implement these changes because as our population ages, as our demographics change, increasingly, more and more people are going to need to go to financial advisers to meet their various stages of life, to be able to meet their financial objectives.

DAVID KOCH:

And particularly in retirement, with compulsory superannuation, when people retire they're going to retire with a big lump of money aren't they? So it's got to last them for the rest of their lifetime and be invested wisely.

KELLY O'DWYER:

Absolutely right. And that's another reason why the Government, on the superannuation front, is also looking at making sure that when people do retire, and when they go to their financial adviser, that they can actually get advice on a whole range of products they can purchase. And we're looking at comprehensive income retirement products as well that can meet peoples' needs at different stages of their life.

DAVID KOCH:

The Australian Securities and Investment Commission, they'll still be the regulator for the advisers?

KELLY O'DWYER:

Yes, they will, although what we're doing in terms of making sure that the standards are set and properly set is we're putting together a new board, a new professional standards body board of nine people, that will be able to set the exam, the code of ethics, the education requirements, the ongoing professional development components. They will engage in setting up the entire framework, but obviously, ASIC will remain the regulator and make sure that if anybody is doing the wrong thing, particularly now that we've given them additional resources and additional money, not only will they be detected, but they'll be prevented from doing the wrong thing.

DAVID KOCH:

And this board just isn't going to be a bunch of lawyers and accountants? You're going to have representatives of all of us humble investors on there?

KELLY O'DWYER:

That's right. Indeed, there'll be somebody who's got a strong educational background, there's going to be somebody who's got a strong ethics background, we'll have people from the big end of the industry and a number from the small end of the industry, and consumer representatives as well. There'll be three of those.

DAVID KOCH:

Perfect. I think it's a great step forward, because you go and get advice with a whole lot more confidence if you know that there's minimum levels of education and ethics there. It's a great step forward. Minister thanks for joining us, appreciate it.

KELLY O'DWYER:

Great pleasure Kochie.