No advice, no fee

The reform package, which will come before Parliament in two parts, includes the banning of commissions and puts planners under legal responsibility to act in their clients' best interests.

Clients will also have to actively renew their contracts with planners every two years by "opting in". If the client does not sign the contract the planner stops getting paid. Most of the financial-planning industry accepts the changes.

The industry has been given big concessions by the government. Opt-in will be every two years instead of every year as originally planned. The banning of commissions and opt-in will not apply to those already paying commissions to planners. The ban on commissions will apply to new clients only and newly recommended products from the middle of next year. That means most of the planning industry's commissions will be protected for years.

One of the key benefits is that the reforms will help to make advice available to all. Commissions incentivised planners to advise those with big retirement savings. The bigger the lump of money being advised, the bigger the commission, regardless of how much work was involved.

The reforms will help to align the price of advice with the work involved. Those with simple needs will pay less for advice than those with complex needs. Superannuation funds are leading the way on providing simple, limited advice to fund members after the government made changes in 2009 to address the "advice gap" - where a fund member who wants limited advice could not get it from financial planners.

Super funds are getting together with financial-planning firms to offer comprehensive financial planning that is affordable.

The Coalition supports the statutory best-interest duty on planners but it does not support opt-in.

The Labor government needs the support of the independents to pass the reforms. But a couple of the regional independents have indicated they are against opt-in because they believe opt-in will add to the costs of small financial-planning businesses operating in their electorates. However, Rice Warner Actuaries says opt-in will cost financial planners not nearly as much in administration as the financial-planning industry has been saying.

The opt-in provision is essential to the integrity of much of the reform package. Only some clients will pay by the hour or pay a scheduled fee for a particular service. Most investors will pay an asset-based fee, which is a percentage of the money they have invested on the advice of the planner. Opt-in is an important check on what can happen now with commissions - when a client never hears from the adviser but keeps paying the asset-based fees nevertheless.