Quality of advice will end in red-tape blues

If I were a financial adviser, my advice to myself would be to find another job.

Many advisers are doing so and, honestly, I wonder about those who hang in there, facing a ream of new regulations so vast more are being drawn up as we speak - I gave up after section 961B(2)(g), and it's only a few hundred pages in - collectively called the Future of Financial Advice (not my capitals, by the way), and known by an acronym-loving government as FOFA.

Much has been made about commissions being abolished - not altogether true, which I'm coming to - but FOFA changes the whole nature of financial advising, for the worse, I fear.

Never mind the quality, feel the width of the adviser's written recommendation. FOFA is all about ticking boxes, filling in forms and writing, say, a 10,000-word essay on why the plan is good for you.

Gadens Lawyers has rummaged through the regulations and, as senior partner Jon Denovan puts it, ''the offence is for not doing it, not for getting it wrong''. But then a lawyer would say that.

Still, it sounds awfully like an adviser can recommend anything so long as it's not because ''I make more money if you do that''.

This government has a special skill in getting the wrong end of the stick. Just as its solution to Telstra's wholesale monopoly wasn't to hive it off, but to spend who knows how much on a government-owned broadband network instead.

Worried that advisers push share funds on clients who shouldn't be in them, the government is convinced commissions must be the root of the problem. Well, if that's so, it hasn't fixed it because funds are letting advisers take out a service fee from the return instead.

FOFA goes on about ''conflicted remuneration'', which boils down to whether a payment is ''reasonably likely'' to influence a recommendation.

Who's supposed to tell? Will advisers self-assess whether they're reasonably likely being unbiased?

What gets me is that advisers can subtract an asset fee - a percentage of the amount invested. So the more you invest, the more they get. What's the difference between that and a commission? Don't ask me.

All right, like FOFA's regulations, maybe I'm being pernickety.

The real problem is how the big banks and fund managers control advice. They sell glorified computer administration programs - so-called platforms - which carry their products to advisers, who pass the costs on.

No matter how good an investment, if it's not on a platform, you'll never hear about it.

Tragically, small-time advisers won't be able to afford to compete with the banks thanks to the costs of FOFA's red-tape rigmarole.

And for FOFA's sake, what adviser working for a bank is going to recommend another bank's product?

Follow David on Twitter @moneypotts

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