Russell DeborahDr DEBORAH RUSSELL (Labour—New Lynn): I'm delighted to hear that the Opposition will be constructive on the select committee. I know that the promise that Mr Hudson has made is a sincere one because in the recent firearms legislation bill that we've worked on together on that particular committee that has indeed been a very constructive relationship. So I'm sure there will be a constructive relationship on this bill. This bill seeks to regulate the conduct of financial markets institutions and Mr Hudson in his speech raised a couple of interesting points and they're related. He said first of all that on this side of the House we perhaps didn't understand the need for businesses to make a profit and that we felt that making a profit was a bad thing. I reject that view. What we want to be sure of is that businesses make a fair profit and that businesses make a profit in the service of their customers not at the expense of their customers. We all know that trade benefits both or all partners but unfair trade exploits one partner. What we want to make sure of is that there is fair trade between institutions and their customers and Mr Hudson raised the point. He said Was there any evidence really that in fact there had been problems with financial institutions and in particular the financial institutions of the sort that are being dealt with in this bill?" and the answer is yes there have been problems. In particular there's some really interesting evidence around so-called soft commissions. Now a soft commission is when we're talking about individual consumers—retail consumers like you and me. They are commissions where the person the employee—the member of the institution—is paid not necessarily in hard dollars but in a benefit. In particular an overseas trip might be the reward for selling a particular number of financial instruments—a particular number of KiwiSaver memberships a particular number of insurance policies or a particular number of investment schemes. It turns out that in May 2018 the Financial Markets Authority looked at soft commissions in the life and health insurance industry and these people are quite hard-nosed. They concluded that soft commissions were effective sales incentives for financial advisers. They found that a higher value of these soft commissions was related to higher sales incomes for insurers. They found that increased spending by insurers on soft commissions appeared to relate to increased sales—perhaps by only a small amount but it was there. The qualification date for trips overseas appeared to coincide and to correspond with a peak in sales. When one insurer removed their overseas trips as a sales incentive their sales dropped by about a third—so that's quite significant—but only 42 percent of commissions required the adviser to sell a particular number or a value so there was a real incentive going on there. It's a tricky problem. Of course we want to motivate people to do their jobs and to do them well and of course in a sales-oriented industry making sales is critical. But at what point does a commission provide an incentive so that instead of selling the customer a product they genuinely need or a product that will genuinely serve them the real service that is performed is the commission that is paid to the sales agent? That's a very tricky point to judge. Now this bill does not set out to make that judgment in itself but it does require institutions to set up rules for themselves as to how they will conduct themselves to set up understandings in institutions as to what is a reasonable way to remunerate sales staff and what is not. I think it is worth remembering that in terms of these so-called sales staff in some institutions these are bank tellers. They are financial advisers. Their objective is to help a customer or a client to structure their finances as best possible but their advice is being skewed by the presence of a commission. So how do we get institutions to regulate that? Well we invite them to think about them themselves and this is what this bill does. Now I agree there are some pretty complex issues in this bill and I think it is worth spending our time discussing it at select committee as to whether or not this will be effective and as to whether or not the rules will actually work in the way in which they are intended. I know from my previous experience of working with people across the aisle such as Mr Hudson and Mr Young who are interested in these sorts of areas that we will have a constructive and reasonable discussion about it. But it is a discussion worth having and that is why I commend this bill to the House."