Illustration: Rocco Fazzari.

Illustration: Rocco Fazzari.

When the regulator sent some shadow shoppers off to financial planners, they returned with more than a few bad apples. So bad that it's drafting regulations that will go where no rules have been before.

ASIC is like a kid in a candy store.

Only trouble is most of the shadow shoppers thought they got good advice. What would they know? So ASIC is on a mission that will regulate small advisers out of existence and inadvertently lift the cost of getting advice.

Sadly, the government has form. Add to the other misadventures it entrusted to bureaucrats, including but not limited to, as they would say, an overpriced carbon tax, the school hall duplication and pink batt fiasco, its future of financial advice revolution - or FOFA, as it calls it.

Heaven knows there are dud advisers out there. And ASIC's shadow shopping is, like Judge Judy, based on real people and real cases. The shoppers really did want financial advice, paid for it themselves and were inconveniently happy with what they got.

Yet only two of 64 advisers gave what its panel of peers considered good advice. The rest were adequate or downright dodgy, with one even handing over a statement of advice based on the previous client.

As for the tiny minority who felt diddled, ASIC thought they'd been given good advice. Ingrates.

My favourite is the client who wanted to retire early with insufficient funds and considered it bad advice when told to stay on and pay off his debts.

See the problem? We don't know what's good for us, which is a dangerous first principle for a government or a regulator.

FOFA's centrepiece is banning commissions paid to advisers by fund managers. Never mind that it's already happening, without a single new regulation, at the iniative of the planners' peak bodies and leading fund managers. Mind you, instead they clip a percentage of how much is invested and call it an asset fee.

Same difference. If a commission paid by a fund manager encourages an adviser to sell you something you don't need, so must an asset fee based on how much you have to spend. Er, invest.

Yet despite an avalanche of legislation, and the fact asset fees were the modus operandi of Storm Financial, which prompted FOFA, they'll be left alone. Oh, except borrowings can't be counted as well.

So in fee-fi-FOFA land, advisers will only want to know you if you're comfortably off, which kind of defeats the need for advice.

And there will be fewer to ask anyway, due to the costs of complying with the legislation and dealing with what ASIC comes up with in regulations, where it has carte blanche to go for broke - as some advisers will become.

It's the independents with high overheads who will likely be driven out. That will leave the big groups, owned mostly by banks, pushing their own products that, untainted by commissions, will then by definition be in a client's best interests.