(Transcript from SBS World News Radio)
If you are considering using a financial planner to help set up your retirement - consumer groups want you to choose one carefully.
They say changes to federal laws to prevent financial planning fraud are putting consumers at even greater risk.
Greg Navarro reports.
(Click on the audio tab above to hear the full report)
In 2005, Bernard Kelly invested money in a forestry company called Timbercorp - on the advice of a financial planner.
He hoped the move would set his family up for the future.
"It was to self-fund our own retirement so we wouldn't have to be a drain on the government system and to get ourselves ahead in life and leave something for our children."
Almost a decade later, it's a decision the 54 year old Melbourne man is still paying for after Timbercorp collapsed.
It's a decision that cost him his marriage and most of his life savings.
"I've had to go get some counselling through this. It's torn me down as a man, a provider, and a person that's trying to do the right thing to bring your kids up and show them the way - it's hard, it is hard."
Timbercorp's collapse was one of several high-profile failed investment schemes that led the previous Labor government to strengthen regulation of the financial planning industry - amove they said would better protect consumers.
This week the federal government changed some of those reforms to include requiring advisers to act in the best interests of the client and disclosing all fees.
It has also restored a provision for bank employees to be paid bonuses or commissions, which Choice CEO Alan Kirkland says is not in the best interests of consumers.
"We don't like to see doctors rewarded for how many pharmaceuticals they push - because that would obviously compromise the quality of health advice - and the same principles apply in financial advice: if you go to see an adviser you want to be absolutely confident that they are giving you advice based on what's best for you rather than what's best for their hip pocket or their employer."
Mark Rantall is the CEO of the Financial Planning Association which has about 18,000 members.
He says those fears are unwarranted because financial planners can't receive any bonuses which could influence their advice.
"Consumers have got nothing to fear over these reforms that have been passed. There has been a lot of misinformation, a lot of politicising, and that's all par for the course."
But Professor Gail Pearson, who teaches business law at the University of Sydney, says some of the changes to federal reforms don't help to instil confidence in the industry.
"There have been strong messages out there in the community for a long time that the financial planning industry is an industry that cannot be trusted and I think this reintroduction of this commission-based remuneration plays into that, and plays into those fears in the community."
Bernard Kelly says his financial planner appears to have been motivated by bonuses.
"I mean there were loans set up in our names that we didn't even know about and that's what's come back to bite me now. I find out now that every aspect of where we invested, he was taking money off the system."
Professor Gail Pearson says people should not rely on federal reforms alone - they still need to do their homework before choosing a financial planner.
"I think consumers should always be concerned with their money, especially their retirement money, and they should be asking a lot of questions before they decide to act on any opinions, recommendations, sales spiel they get."
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