Goldsmith PaulHon PAUL GOLDSMITH (National): Well it was very pleasing to hear that previous speech from the chair of the committee that worked hard on this bill. It's interesting; I was the Minister at the time when it was first developed and I'm sure that if I had brought this bill to the House the member who has just resumed his seat probably would have opposed it but that's the funny way of politics.The origins of this legislation go back to the global financial crisis I suppose and the situation where right throughout the world there was concern about the conduct of financial markets. There were a lot of people who lost a lot of money in the course of the market transactions that went on during the global financial crisis. In New Zealand the particular thing where a lot of people lost a lot of money through was the finance company collapses that we saw.New Zealand like many countries back around 2012 and 2013 came through with some very heavy and substantial regulations in the financial markets area. One of those was the regulation of financial advice in New Zealand which up to that point had been pretty relaxed. As a result of that there was a five-year review period where we agreed when the first bill came in to take stock of where the regulated financial advice services got to. As a result of that review this legislation was developed and then a wider series of issues came along as we went.From my point of view there were a couple of things that were driving it. One is that when you look at why New Zealand is the successful country that it is and why so many people want to live here it's because we have high living standards; we have a good strong vibrant economy; and we can provide good quality healthcare and education superannuation for everybody when they're old and opportunities for people to get ahead. That's partly why New Zealand is a successful country but we also have a series of things which are very precious to us and that we should never lose sight of. One is the quality of our environment but another one is the relatively high-trust low-corruption rule of law - based society and economy that we enjoy. That is incredibly rare in this world and we're one of the relatively few places where there is that high level of trust and relatively low levels of corruption. But we should never take that for granted and we're not perfect by any means. One of the core functions of the Government is to keep asking ourselves: have we got the settings right so as to encourage good levels of probity in the way that various things are dealt with? Here we're talking about the conduct of financial markets so that people can have the confidence to invest their funds effectively.Another driver of it of course was the concern around the escalation in house prices that we've seen in many of the cities around New Zealand in recent years. Part of that of course is also related to the conduct of financial markets. A lot of people invest all their savings in houses because nobody has ever managed to steal a house very effectively but in living memory in the last 20 or 30 years there have been three or four generations who have lost huge amounts of savings through the sharemarket collapses and the finance company collapses.So part of the reason why New Zealand doesn't have a great tradition of saving in a financial market sense as opposed to real estate is because of a natural wariness over the conduct of those financial markets. So that is why we took the step to regulate as heavily as we did. Of course if you have on this side of the House a philosophy of regulatory restraint you do that with a great of care and caution and concern. So we're asking ourselves: did we over-egg it or did we get it about right or what are the things we need to do to change in order to ensure that the financial markets sector continues to innovate and provide great services and isn't bogged down in regulation?One of the outcomes of that was a desire to enable robo-advice which was one of the things that I pushed quite hard early on. We want to be enabling of innovation as much as we can. The purpose of all this legislation is to ensure that New Zealanders can get access to advice. One of the concerns arising several years after the heavy regulation was introduced post the global financial crisis was that one of the consequences of that heavy regulation was that it had become so expensive to provide that advice—because you have to jump through many hoops of fire—that the net effect was that people with relatively modest savings didn't really have access to financial advice. You needed effectively to have half a million dollars before anybody was interested in offering that advice.So one of the objects of this legislation is to try and streamline the way that the regulations operate. How successful in the end the Government has been at that is an open question and something that we'll come back to but enabling digital innovation in this area and removing barriers to that is an important part of encouraging people to access financial advice more easily. Certainly the younger generation of Kiwis would far rather turn to an app of some sort to get effectively some advice on what to do with their savings rather than necessarily sitting down and talking for half an hour to somebody and going through 500 questions. So we need to make it fit for purpose fit for the task. So that was one of the issues that we dealt with there.The other thing of course is around conflicted advice. When you look at it it's relatively straightforward. If somebody is coming along and offering me a financial product it is highly relevant to know whether or not they are getting a commission. If they're suggesting that you invest in product A rather than product B we should expect to be able to know whether they're getting a commission on product A and not on product B. That is a fundamental piece of transparency that is required in the provision of advice. So that is the purpose of requiring some transparency around what an adviser is able to do. There have been long debates at the Economic Development Science and Innovation Committee about how far to push that. In terms of somebody who is working within a particular firm that offers a bunch of financial services where we got to is you can't expect an adviser within that firm to offer everything in the whole market that is available but you can expect them to say to make it absolutely clear when they're giving that advice Well these are the products that I'm selling but there is a whole lot of other stuff that you could look at. I'm not pretending that the products that I'm offering are the only ones and obviously I have a commission that is related to those products." But just getting transparency into that process has been a critical part of this.Then the second point was to make it quite clear around the expectations that advisers should put the interests of the clients first. You might think that's obvious but if the practice has been to churn clients through chopping and changing through different offerings purely so that the adviser can get a commission every time they do it regardless of whether the change is beneficial to the client then that is not something that we would support. You might argue that that's something for individuals to deal with but the whole point of financial services is it is a very complex area and that is why we have chosen to regulate in this area.So I hope that this will over time add to the slow process of rebuilding confidence in the conduct of financial markets in New Zealand so that more New Zealanders diversify their savings away purely from real estate and into the financial sector and on that basis I commend this legislation."