Arthur Sinodinos.

Assistant Treasurer Arthur Sinodinos. Photo: Luis Enrique Ascui

The government's looming changes to the financial services sector could spark a wave of financial collapses similar to those between 2006 and 2010 that wiped out $6 billion in savings of more than 120,000 investors, Industry Super Australia claims.

ISA, which represents 5 million Australians with industry superannuation savings, is opposed to the government's plans to roll back Future of Financial Advice reforms introduced under Labor.

The government says it is rolling back the reforms to cut red tape and costs for consumers. It wants to water down requirements for financial planners to act in the best interests of clients, and scrap rules that would force financial planners to tell clients regularly how much they are paying in annual fees.

These fees can add up to $500 on a fund with $100,000 under management, $1000 a year when the fund grows to $200,000 under management, and $2000 a year when it grows to $400,000.

In a briefing paper, ISA warns that allowing financial planners to take commissions for selling bulk policies, and re-allowing other forms of conflicted remuneration, could pave the way for another financial collapse like Storm or Opes Prime.

''While it may be true that the FOFA laws will not prevent every instance of further financial collapse, by re-permitting conflicted forms of remuneration and lowering conduct requirements [on financial planners] … the likelihood of future scandals are considerably increased, some would say a certainty.''

A spokeswoman for Assistant Treasurer Arthur Sinodinos said: ''We reject outright the claims made by Industry Super Australia. The original FOFA would never have ensured against another financial collapse from happening.''

ISA chief executive David Whiteley said: ''The government is right that you can't put in place anything to guarantee the prevention of another financial collapse, but you can take steps to guard against these scandals, especially when we know what caused them in the past.''

With Peter Martin