Federal Finance MInister Mathias Cormann. Photo: Andrew Meares
Consumer groups and industry super funds have hit out at the federal government's decision to push ahead with controversial changes to financial advice reforms.
Under changes to be introduced from July 1, the government will abolish a 'catch-all' provision for advisors to act in the best interests of their clients.
It will also exclude general advice from conflicted remuneration rules and remove the requirement for investors to 'opt-in' to authorise ongoing fees every two years.
The changes follow months of debate and speculation over the amendments to the future of financial advice (FOFA) reforms, introduced under Labor in response to a series of corporate collapses.
Consumer group Choice said the changes would wind back essential protection for consumers seeking financial advice.
''Conflicted and poor financial advice has cost consumers billions and in too many cases led to people losing their homes and life savings,'' chief executive Alan Kirkland said.
''This is why consumer protections were originally needed and exactly why they should not be removed.''
Industry Super Australia said the changes would see the re-introduction of kickbacks paid to financial advisors.
It said the removal of the 'opt-in' clause would allow commission-like fees to erode consumer investments, including super.
"The government's proposals, lobbied for by banks and financial planners, will create caveats and loopholes,'' chief executive David Whiteley said.
''Consumer protections should be ironclad, not subject to fine print.''
Finance Minister Senator Mathias Cormann said the changes would not see a return of commissions.
''The Government's changes ... provide that certain incentive payments related to the provision of general advice are not conflicted remuneration,'' he said.
''This is not and never has been designed to bring back commissions for financial advisers.''
He said the government would move to introduce additional provisions stating that any payment related to general advice ''cannot be an upfront or trailing commission''.
''To put absolutely beyond doubt how serious the Government is about not permitting commissions in these circumstances, we also intend to put in place regulation-making powers that may prescribe circumstances in which all or part of a benefit is to be treated as conflicted remuneration,'' he said.
The government's changes will be introduced as regulation to take effect on July 1 where ''legally possible''.
This has also angered groups, who say the issue needs further scrutiny.
"Industry Super Australia is also deeply concerned that the Government would seek to make these far reaching changes by regulation. It is unclear what the urgency is,'' Mr Whiteley said.
"The prudent course of action for the government is to shelve any plans to reduce consumer protections in financial advice. This would be a much less risky proposition than removing consumer protections, particularly given the regulator is still cleaning up some of the scandals of recent years.''
But the chief executive of the Australian Bankers' Association, Stephen Munchenberg, backed the government's move to push ahead with the roll-back of Labor's reforms on Friday.
Under the changes, bank staff are able to receive incentive payments when providing ''general advice'' – something critics say will open the door to commission-like payments.
The latest amendments explicitly prohibit up-front or trailing commissions, but will allow banks to retain ''balanced scorecard'' approach to remuneration.
This is where sales targets can feed into bonus payments, alongside other factors such as risk and customer service.
Mr Munchenberg said the changes would ''strike the right balance between consumer protection and consumer access to affordable.''
"Without the package of amendments, customers would not be able to continue to do their banking in simple, easy and low cost ways as they do now, or get personal advice tailored to their specific needs,'' he said in a statement.
''Customers, and other consumers, would also not be able to continue to get access to freely available general advice and information about financial products from a bank branch, a bank website and even off their smartphone, like they do now."