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Official Committee Hansard COMMONWEALTH OF AUSTRALIA Official Committee Hansard JOINT COMMITTEE ON CORPORATIONS AND FINANCIAL SERVICES Reference: Financial products and services in Australia FRIDAY, 4 SEPTEMBER 2009 SYDNEY BY AUTHORITY OF THE PARLIAMENT INTERNET Hansard transcripts of public hearings are made available on the inter- net when authorised by the committee. The internet address is: http://www.aph.gov.au/hansard To search the parliamentary database, go to: http://parlinfoweb.aph.gov.au JOINT STATUTORY COMMITTEE ON CORPORATIONS AND FINANCIAL SERVICES Friday, 4 September 2009 Members: Mr Ripoll (Chair), Senator Mason (Deputy Chair), Senators Boyce, Farrell, McLucas and Wil- liams and Ms Grierson, Ms Owens, Mr Pearce and Mr Robert Members in attendance: Senators Farrell, McLucas, Mason and Williams and Ms Owens, Mr Pearce and Mr Ripoll Terms of reference for the inquiry: To inquire into and report on: Issues associated with recent financial product and services provider collapses, such as Storm Financial, Opes Prime and other similar collapses, with particular reference to: 1. the role of financial advisers; 2. the general regulatory environment for these products and services; 3. the role played by commission arrangements relating to product sales and advice, including the potential for conflicts of interest, the need for appropriate disclosure, and remuneration models for financial advisers; 4. the role played by marketing and advertising campaigns; 5. the adequacy of licensing arrangements for those who sold the products and services; 6. the appropriateness of information and advice provided to consumers considering investing in those products and services, and how the interests of consumers can best be served; 7. consumer education and understanding of these financial products and services; 8. the adequacy of professional indemnity insurance arrangements for those who sold the products and services, and the impact on consumers; and 9. the need for any legislative or regulatory change. WITNESSES ATKIN, Mr John, Managing Director, Trust Company Ltd; and Executive Committee Member, Trustee Corporations Association of Australia............................................................................................. 18 BATEMAN, Mr Dennis, National Treasurer, Association of Financial Advisers Ltd .............................. 26 COHEN, Mr David Antony Keith, Group General Counsel, Commonwealth Bank of Australia ........... 56 COMYN, Mr Matthew Peter, Executive General Manager, Equities and Margin Lending, Commonwealth Bank of Australia................................................................................................................. 56 ELVY, Mr Hugh, Head, Financial Planning, Institute of Chartered Accountants in Australia ................ 2 EVANS, Mr Grahame, Managing Director, Professional Investment Services....................................... 111 FITZGERALD, Mr Anthony George, Managing Director, State Trustees Ltd; and National President, Trustee Corporations Association of Australia........................................................................... 18 FREEMAN, Ms Elissa, Senior Policy Officer, CHOICE ............................................................................. 98 FRENCH, Dr Brendan James, General Manager, Customer Relations, Commonwealth Bank of Australia ........................................................................................................................................................... 56 GUNNING, Mr Timothy James, General Manager, Commonwealth Financial Planning, Commonwealth Bank of Australia................................................................................................................. 56 KALANTZIS, Ms Christina, Co-chair, Government and Policy Committee, Association of Financial Advisers; and Principal, Alexis Compliance and Risk Solutions Pty Ltd.................................. 26 KLIPIN, Mr Richard, Chief Executive Officer, Association of Financial Advisers .................................. 26 MACKAY, Mr Tim, Director and Certified Financial Planner, Quantum Financial Services Australia ........................................................................................................................................................... 44 MACKAY, Ms Claire, Director and Certified Financial Planner, Quantum Financial Services Australia ........................................................................................................................................................... 44 McEWAN, Mr Ross Maxwell, Group Executive, Retail Banking Services, Commonwealth Bank of Australia....................................................................................................................................................... 56 NAREV, Mr Ian Mark, Group Executive Manager, Business and Private Banking, Commonwealth Bank of Australia................................................................................................................. 56 NOWAK, Mr Michael, Queensland Chair, GenXt Committee, and Adviser, Association of Financial Advisers Ltd .................................................................................................................................... 26 PETRIK, Miss Bianca, Corporate Development Manager, Professional Investment Services .............. 111 TAGGART, Mr James, National President, Association of Financial Advisers Ltd................................. 26 WHITE, Mr Lee, General Manager, Leadership and Quality, Institute of Chartered Accountants in Australia................................................................................................................................... 2 Friday, 4 September 2009 JOINT CFS 1 Committee met at 8.46 am CHAIRMAN (Mr Ripoll)—I declare open this public hearing of the Parliamentary Joint Committee on Corporations and Financial Services. This is part of a series of public hearings the committee will hold to inform its inquiry into financial products and services. The committee is inquiring into issues associated with recent financial products and services provider collapses, such as Storm Financial, Opes Prime and other similar collapses. In conducting its inquiry the committee has made a decision to focus specifically on non-superannuation products and services. Witnesses giving evidence to the committee are protected by parliamentary privilege. Any act which may disadvantage a witness on account of their evidence is a breach of privilege and may be treated by the parliament as a contempt. It is also a contempt to give false and misleading evidence to a committee. The committee prefers to hear evidence in public, but we may agree to take evidence confidentially. The committee may still publish confidential evidence at a later date but will consult with the witnesses before doing this. CORPORATIONS AND FINANCIAL SERVICES CFS 2 JOINT Friday, 4 September 2009 [8.47 am] ELVY, Mr Hugh, Head, Financial Planning, Institute of Chartered Accountants in Australia WHITE, Mr Lee, General Manager, Leadership and Quality, Institute of Chartered Accountants in Australia CHAIRMAN—Welcome and thank you for your submission and for appearing today. If you would like to make some opening remarks, that would be welcome. Mr White—The Institute of Chartered Accountants thanks the committee for the opportunity to appear before it today. The Institute of Chartered Accountants in Australia is the professional body representing chartered accountants. The institute represents over 50,000 chartered accountants and 12,000 accounting graduates who are currently enrolled in our chartered accountants postgraduate program. Our members work in diverse roles across commerce and industry, academia, government and public practice throughout Australia, including rural and regional Australia and in over 140 countries around the world. The institute’s aim is to lead the profession by delivering visionary leadership projects, setting the benchmark for the highest ethical, professional and educational standards. The institute represents a wide range of professionals who operate within the financial services sector and has a strong interest and involvement in this industry. The institute believes that the role of the accountant within the financial advisory industry has substantially diminished as a result of the regulatory changes to the financial services industry. An opportunity exists to rebalance this and increase consumer accessibility to quality financial advice. At the outset, the institute would like to clearly state that it is very supportive of the objectives of this inquiry and understands the importance of a robust financial services regulatory framework and the services provided to the public. In preparing our submission and today’s opening remarks, we have approached the challenges facing this committee by endeavouring to analyse the various issues and to prioritise them with what we see as the drivers for the delivery of quality financial advisory services. We have also drawn on our knowledge and experience that arose with the delivery of professional services in other regulated industries and, in particular, where governments decided to alter policy settings in those industries. For example, the changes that occurred with the audit profession with CLERP 9 and, more recently, with the new tax agent services regime. I will return to the drivers. The institute has identified what it believes are the key drivers for the delivery of quality financial advisory services—and there
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