Ahead of the federal election this year, shadow assistant treasurer Stephen Jones (Member for Whitlam) has told Momentum Media in an exclusive interview that stability and certainty are key in financial services after five years of “unprecedented regulatory change”.
Stephen Jones, shadow assistant treasurer, shadow financial services minister, and Member for Whitlam
The shadow assistant treasurer and shadow financial services minister spoke to Momentum Media’s editor of mortgages Annie Kane in a podcast about the issues of focus for the Labor Party in financial advice, superannuation, and mortgage broking should it win the election this year.
Mr Jones said that the financial services sector has not yet had the opportunity to digest all of the regulatory changes over the last five years.
“We’ve had a tsunami of change. What the industry needs now is stability and certainty,” Mr Jones said.
“Let’s just focus on the issues that need to be fixed instead of going around looking for problems that don’t exist.”
Advice model “busted”
Financial advice will be one area of focus for the Labor Party if it wins the election, with Mr Jones stating that “fixing the advice area is the great unfinished business in the financial services area”.
The shadow assistant treasurer blasted the federal government for its “mishandling of reforms”, labelling it a “disaster”
“There were a whole bunch of changes that were in play, there was an unknown timeline for it, not going back months or even years,” he said.
“Some of this stuff has been five, six years in the making. How a government could monumentally mishandle a bunch of this stuff is beyond belief, particularly a government that says it’s a good economic manager.
“The existing market is busted. It’s not going back to the way it was 10 years ago or 20 years ago, so we need a new business model, and it’s not one, it’s lots of business models which provide reliable professional advice and information to people.”
As such, he suggested that financial advice requires a new model that is tailored to the different professions within the sector and the different types of advice demanded by clients.
“The profession is not homogenous. You’ve got brokers, you’ve got advisers, you’ve got risk advisers, you’ve got wealth advisers. There is a core level of qualification that is needed that is common to all of them, but there are also specialisations within a profession that need to be accounted for in the accreditation and licensing system and we want to fix that.”
While the government sets the regulation and has a role in some parts of the market, Mr Jones said the onus is on the advice sector to formulate business models that would meet consumer needs.
Property prices on the radar
Alongside advice, Mr Jones has stressed that the Labor Party is “deeply concerned” with the housing affordability issue, and the possibility that home ownership may be out of reach for some Australians.
“If you think about the overall market of consumers, let's call them Australians, not everybody's got the same problem,” he said.
Mr Jones singled out the group of Australians who are “going to be squeezed between – depending on government policy – the ‘never be able to afford to get a home’ and ‘will be able to but not sure when’”.
As such, Mr Jones said that a “bunch of different solutions” would be required to provide customised support to these segments.
“If we try and design solutions which push everyone through the one agile model about what home buyers are like, we'll get it wrong,” he warned.
“So, different solutions [are needed] in every part of the market. Some of it is government providing support for social housing. Some of it is about government working with market and property developers to get more affordable housing (that is, a housing stock which is going to be available for people to enter the market) … There’s no doubt that there’s a supply issue there.
“But I also think we’re going to have to start looking at different ownership models as well and different entry-point models. So, whether they’re shared equity models, whether they’re common title models, there are a bunch of different things that we need to look at so that somebody can enter the property market, have a roof over their head, build a capital base for themselves, and maybe use that to move into the house of their dreams.”
Mr Jones also touched on broker remuneration, highlighting that the cost of broker commissions is “priced into the cost of a mortgage”.
When asked if he believed Australians should pay for mortgage advice, Mr Jones said: “Well, they are paying one way or another. There’s no such thing as a free lunch.
“The commission that is paid by the institution, by the lender to the broker is priced into the overall cost of a mortgage… So, customers are paying one way or another. And it should be transparent and the ethical requirements on advisers and the best financial interest duty, make all of that sort of stuff transparent. That’s a good thing.”
However, he underscored the value of the channel while also recounting his own positive experience of using a broker.
Mr Jones reiterated that the ALP would not seek to change broker remuneration should it win government.
“If it ain’t broke, don’t fix it”, he said.
In closing, Mr Jones urged all financial services, credit, and superannuation advice sectors to focus on what could be “a very difficult time” for consumers amid rising interest rates and cost of living pressures, and offered the industry a strong message.
“We need you guys focusing on the needs of the consumers, not looking over your shoulder for the next wave of regulatory change that’s going to be coming to from whoever’s in government,” he concluded.