Sunday, November 30, 2014

Dancing to a union tune in the senate

THERE’S a long-held view that lunacy prevails across the nation from Melbourne Cup Day to Australia Day.

The antics of erratic PUP senator Jacqui Lambie, Motoring Enthusiast Ricky Muir, independent Nick Xenophon, independent (formerly DLP) John Madigan and Labor’s Sam Dastyari would seem to confirm this.

In an extravagant example of populist grandstanding, this combination (backed by the Greens Senator Peter Whish-Wilson) managed on Wednesday to retrospectively undermine small financial advisory businesses across the country and prop up the huge trade union super funds and the big banks which would otherwise have had their activities reined in.

So much for Lambie, Muir, Xenophon, Madigan and Whish-Wilson’s claims to be champions of the little people, society’s underdogs.

As for Dastyari, who propped up former MP Craig Thomson and was allied to the notorious NSW ALP powerbroker Eddie Obeid, he remains a tool of the union movement.

Hundreds of thousands of older Australians rely on superannuation for income and many more will in the next decade as the baby boomers take retirement.

Most depend on the big banks and the big industry funds for their retirement advice but, unbeknown to them, the bank and super fund advisers have merely been peddling their own institutions’ financial products — not looking across the marketplace for the best investments that would work for their customers.

Their loyalty has not been to the punters but to their own bosses — self-interest wins every time.

The Coalition went to the election promising to take on the vested interests — the union funds and the banks — empowering retirees and also strengthening the case for independent financial advisers.

The Labor legislation then in place favoured the banks and the big union superfunds which, naturally, were loaded with highly paid union stalwarts.

The superfunds have paid Labor back generously — even to the extent of bankrolling a left-wing website The New Daily with an initial $3 million to launch the beast and a further $3 million to keep the non-performing Labor propaganda site afloat.

Technically it was possible to change the status quo by regulation — and the senate had voted twice to do so before the amendments took effect on July 1, 2014.

It was these amendments to the Future of Financial Advice (FOFA) legislation that the senate voted to disallow on Wednesday after heavy lobbying from Industry Super Australia and the big banks.

Labor, the Greens, Lambie and the two independents have now undone provisions which would have ensured the requirement for financial advisers to act in the best interests of their clients remained in the legislation in full.

They have removed the ban on conflicted remuneration — the bar on incompatible commissions — and they have added to the tangle of red tape that those attempting to come to grips with their retirement incomes have to deal with.

Nationals senator John “Wacka” Williams, who has been relentless in his pursuit of reckless and criminal financial advisers who have ripped off consumers, provided a good analogy when he argued for retirees and against the wreckers during the debate.

He said the big problem in financial advice is what is called “vertical integration”.

He asked the senators to imagine he was Ford salesman who has been approached by a male customer with a wife and six children who needed a vehicle.

If, he said, he had the obligation to sell a vehicle that was in the customer’s best interests he might find he didn’t have the right product but he would try and sell the customer a Ford — because he was working for Ford.

“I would not say to you: ‘Go down to Toyota. They have got a Tarago, it seats eight, it is a good safe vehicle, it is economical. That would be the best vehicle for you’. I am working for Ford: they pay my way; I am going to try to sell you a Ford.

“That is what happens in the financial planning industry. The big six — the big four banks, Macquarie Private Wealth and AMP — basically run the industry.

“Their planners work for them. And it is likewise in the financial industry when you wish to invest your money or your self-managed super fund or whatever.

“They are going to tell you to invest in one of their products — but it may not be the best product in your case or in your circumstances.”

It’s not that difficult to understand. The banks and the big super companies offer their advisers a wage and their advisers offer their companies’ products.

The Greens are innately contradictory and illogical. It’s easy to understand why they would vote against a consumer friendly measure.

The PUPs supported the amendments, but Lambie has now broken with them — and her vote is one of childish spite.

Labor was rewarding the unions again. More could have been expected of Xenophon and Madigan.

At least you know who to hold responsible for increased super charges, added red tape, and the destruction of small independent financial advisory companies


IMMIGRATION Minister granted broad new powers

Scott Morrison has been granted broad new powers to cancel visas to non-citizens who commit crimes.

IMMIGRATION Minister Scott Morrison has been granted broad new powers to cancel or refuse visas to non-citizens who commit crimes in Australia.

THE Senate on Wednesday passed legislation that broadens the existing grounds for not passing a character test and lowers the threshold for the cancellation of temporary visas for non-citizens.
Labor supported the bill, but urged the immigration minister to use his new powers as outlined by the legislation.

Assistant immigration minister Michaelia Cash said the federal government had low tolerance of criminal behaviour by non-citizens.

"Entry and stay in Australia by non-citizens is a privilege, not a right," she told the chamber on Wednesday.

"The Australian community expects that the Australian government can and should refuse entry to non-citizens or cancel their visas if they do not abide by Australian laws."

A person can now fail the character test if there's a "reasonable suspicion" - not a conviction - for involvement in crime gangs, people smuggling, genocide, war crimes, torture or slavery.

Anyone who has one or multiple jail sentences adding up to 12 months - down from two years - or has an adverse ASIO assessment of child sex charges can also fail automatically.

The minister can cancel or refuse a visa to anyone who fails the character test.

The Australian Greens opposed the legislation, warning it gave unprecedented powers to the minister and risked breaching fundamental human rights.

Greens senator Sarah Hanson-Young described it is as another "power grab" by Mr Morrison.

"Why on earth he thinks he needs more powers is beyond me," she said.

"Give him an inch and he'll take a mile."


Queensland racks up smallest deficit in seven years

Under conservatives

THE Newman Government has chalked up the smallest fiscal deficit since 2006-07, the latest Report on State Finances has revealed.

The predicted deficit for 2013-14 shrunk from more than $6 billion to $2.58 billion after the Government kept a lid on expenses and received $1.5 billion in disaster funding earlier than expected.

“Despite the good outcomes in this report, the changes we’ve made are just the beginning of the work that needs to be done,’’ Treasurer Tim Nicholls said.

“Our expenses are now under control but at the same time we’ve been able to dramatically reduce surgery waiting times, we’ve eliminated the long wait dental list, we’re building new schools and upgrading roads.

“The debt level remains a problem for us with debt per person still at the highest level of any state and it’s clear that even with the most prudent financial management we can only make small inroads into that debt.

“Our Strong Choices plan is the next step in significantly reducing the debt and funding the job-creating infrastructure our growing state needs.”

Meanwhile, Premier Campbell Newman has described his government as a “grown-up” one with more to do in his final ministerial statement to State Parliament for the year, and potentially his last before the next state election.

In an address aimed squarely at voters, Mr Newman told the House while not every decision his government had made had been easy or popular, he believed all had been necessary.

“We are all working relentlessly together to take this State forward, to give Queenslanders everything they deserve and expect from a grown-up State Government,” he said.

“We are working hard for Queenslanders, and I stress today the job is not complete.

“Some of the actions we have taken have been difficult and I acknowledge some have not been easy for many people in our community.

“But all have been necessary. Necessary to deal with the challenges we face as we rebuild Queensland, as we position our state so we can face the years ahead with confidence, with strength and the ability to seize the opportunity of a better future for all Queenslanders.”

It comes a week after an exclusive Galaxy poll conducted for The Courier-Mail revealed that while Mr Newman’s personal approval rating had improved, Labor has gained ground on the LNP since the last survey in August.

The parties are now locked neck-and-neck ahead of next year’s election — 50-50 per cent on a two-party-preferred basis.


Fact check: Chris Bowen scaremongering on return of old-style commissions for financial advisers

The claim: Chris Bowen says the Government's changes to financial advice laws will bring back the type of commissions that encouraged financial advisers to recommend risky investments.

    The verdict: The proposed changes will only apply to some forms of general advice. They do not bring back old-style commissions.

Commentary around the Federal Government's proposed changes to financial advice laws suggests the financial planning and advice industry is about to return to the bad old days when retirees lost their life savings in dodgy investments that paid big commissions to their advisers. But is that really the case?

In 2011, the former Labor government introduced the "Future of Financial Advice" (FOFA) reforms after a series of financial collapses. It turned out that many investors were given inappropriate advice by financial advisers who were motivated by big hidden commissions.

Some in the industry suggested Labor's reforms went too far and in response, the Coalition promised during the election campaign to amend FOFA. In January 2014 the Abbott Government released draft legislation and regulations for consultation, and on March 19 it presented revised legislation to Parliament. The process has since been paused for further consultation.

Labor opposes the changes. On March 25, Opposition treasury spokesman Chris Bowen told Parliament that the original reforms had been introduced in response to collapses such as Westpoint, Trio and Storm Financial.

"The commissions being paid for the advice to invest in Westpoint amounted, on average, to 10 per cent of the amount invested," Mr Bowen said. "And this Government thinks that's just fine. This Government wants to bring back laws which would enable that to happen..."

Will the Government's proposals allow the reintroduction of the type of commissions that were paid to advisers who recommended Westpoint and Trio investments or advisers employed by Storm Financial?

    The claim: Chris Bowen says the Government's changes to financial advice laws will bring back the type of commissions that encouraged financial advisers to recommend risky investments.
    The verdict: The proposed changes will only apply to some forms of general advice. They do not bring back old-style commissions.

General and personal financial advice

There are two types of financial advice - general and personal. The difference between them is that general advice is given without taking into account the client's objectives, financial situation or needs.

A regulatory guide issued by the corporate regulator, the Australian Securities and Investments Commission (ASIC), requires that in the case of general advice, the adviser must warn the client at the outset that they are giving general advice and that "the advice has been prepared without taking into account their objectives, financial situation or needs". The guide says that the advice will automatically become personal advice if the adviser considers the client's relevant circumstances when preparing and giving that advice. ASIC says the adviser "cannot avoid this by giving a general advice warning".

Many situations fall under the general advice description, ranging from general discussions with bank customer service staff to product brochures and advertisements.

Phil Anderson, the chief operating officer of the Association of Financial Advisers (AFA), one of the two largest associations of financial advisers, says that general advice could be telling a customer that "typically younger superannuation fund members will invest in shares as they generate the highest long term returns".

A spokeswoman for AMP, which operates one of the largest financial advice networks in Australia and New Zealand, suggests that general advice could even "be Shane Oliver [AMP's chief economist] talking about market conditions".


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