Financial reforms become law today

The Financial Services Reform Act, which comes into force today, has two important provisions: your financial adviser will have to make clear how much he or she is earning by selling you a product, and you will have to read through a lot more to assess the adviser's recommendations to begin with. The legislation aims to increase disclosure, but it has its critics.

One of the main objections to the Act is its rules on “hawking”. New FSR requirements prohibit unsolicited selling but Clayton Utz's John Moutsopoulos says most financial planners and insurance agents generate business by leads, but the legislation doesn't make clear how far removed individuals must be from initial unsolicited meetings before they can offer to issue or sell a financial product.

The insurance industry has criticised the lengthy amount of oral summaries and warnings about products to retail consumers that are required for telephone sales or enquiries.

Opposition finance spokesman Stephen Conroy is critical of fee disclosure that requires fees and commissions to be reported to the investor in dollar amounts, rather than percentages.

The view is that brand-name financial advisers will benefit from the FSR, as the onus is on investors to scrutinise independence. That means a lot of reading.