-

Parliament bypass: The regulations may be invalid if they are in conflict with the Future of Financial Advice Act. Photo: Andrew Meares

The government plans to introduce legislation aimed at neutering parts of Labor's finance advice reforms on Wednesday under the cover of the Prime Minister's statement on red-tape reduction.

The legislation, which will be separate to the red-tape bills, will remove the catch-all requirement for financial advisers to act in clients' "best interests". It will also re-allow sales commissions and other forms of conflicted remuneration where advice is general in nature.

The change would allow banks to reward tellers and advisers with commissions for selling bank products where they made it clear they were offering general rather than personal advice.

Another clause will remove a requirement for financial planners to write to clients annually informing them they are continuing to receive yearly payments from their accounts, and every second year to invite them to "opt in" to continue the payments. The first letters are due at the end of this financial year.

Because the legislation is unlikely to pass the Senate in time, the government will introduce separate regulations to bypass Parliament and have a more immediate effect.

Fairfax Media understands the regulations will be put to the Governor-General and Executive Council on or about Friday, March 28, the day after Parliament rises for a six-week break.

Assistant Treasurer Arthur Sinodinos did not respond to inquiries.

The timing means Parliament would be unable to disallow the regulations for at least six weeks and probably longer. The minister is not required to table the regulations for five sitting days. The Senate meets for only three days in May.

Industry Super chief executive David Whiteley warned the backdoor method of changing the scope of the Future of Financial Advice Act could create chaos.

He has received legal advice suggesting the regulations would be invalid if they were in conflict with the act.

"The government has stated that it intends to make regulations to create certainty," he said.

"However, doubt around the validity of the government's regulation-making power and a high probability that they will be disallowed will result in more uncertainty for both the industry and consumers."

Consumer advocate Christopher Zinn said he doubted consumers realise what was at stake. "I helped negotiate the changes when I was at Choice," he said.

"If what was a compromise is wound back, consumers will no longer have the confidence that their best interests are legally uppermost in their financial planners' mind, and that corrupting commissions are a thing of the past."

Mr Zinn has set up a website entitled saveourfofa.com.au where the acronym FoFA refers to the former Labor government's act.

"At the moment the debate is perhaps very deliberately argued in subsections that people can't understand, but I think people can understand that it's about trust," he said. "It's hard to trust a financial adviser unless that financial adviser is sworn to act in your best interest and is truly independent."

Follow us on Twitter