Risk insurance is not covered under reforms announced yesterday by the Federal Government, which include commissions on investment products being banned.

Financial Services Minister Chris Bowen outlined a series of reforms designed to tackle conflicts of interest to prevent cases of mis-selling such as those associated with the collapse of Storm Financial, Opes Prime and Westpoint.

Mr Bowen says those conflicts “have threatened the quality of financial advice that has been provided to Australian investors”.

The Government says the measures – most of which will apply from July 1 2012 – will improve the trust and confidence of Australian retail investors in the financial planning sector.

“Over the years thousands of Australians have had their life savings wiped out through inappropriate financial advice,” Mr Bowen said. “They have a right to be angry and we have an obligation to act.”

Included among the reforms is a ban on commissions and volume-based payments related to the distribution and advice of retail investment products including managed investments, superannuation and margin loans.

Crucially, the measure does not initially apply to risk insurance.

Other developments include the introduction of a statutory fiduciary duty compelling advisers to act in the best interests of their clients, transparent charging regulations, enhanced regulator powers and an expansion of low-cost simplified advice.

“These reforms will see Australian investors receive financial advice that is in their best interests, rather than being directed to products as a result of incentives or commissions offered to the financial adviser,” Mr Bowen said.

The Government also plans to set up a statutory compensation scheme led by Richard St John, a former BHP company secretary who has since served with the HIH Royal Commission and government departments, including those of the Prime Minister and Attorney-General.

Industry groups have largely welcomed the reforms, including the Association of Financial Advisers, the Financial Planning Association and the Investment and Financial Services Association.

The reforms follow the Parliamentary Joint Committee on Corporations and Financial Services’ Inquiry into financial products and services in Australia led by MP Bernie Ripoll.

Also see FINANCIAL SERVICES