A reader of the Los Angeles Times recently wrote to the Californian-based newspaper requesting guidance on how to choose a financial adviser. The publication’s response summed up how far financial advice in Australia has come compared to the US. But it also illustrated some of the pitfalls consumers may face if regulation of financial advice in Australia is allowed to backslide.

The LA Times started out by counselling the reader to avoid advisers who are not required to put their clients’ interests ahead of their own.

“They can recommend investments that cost more or perform worse than available alternatives, simply because the recommended investments pay them more,” it said.

“Such advisors often call themselves ‘fee-based,’ hoping you’ll confuse them with ‘fee-only’ planners. Fee-only planners are compensated only by the fees you pay; they don’t accept commissions or other compensation that could influence their advice.”

Thank goodness advisers selling investments that suit themselves better than they suit their clients is a thing of the past in Australia. And thank goodness Australian consumers don’t need to differentiate between different species of advisers when trying to find one to trust.

Right?

Changes to financial advice in Australia over the past decade or so have both advanced the claims of advisers to be professionals and have put consumers of advice in a much better position than they were pre-reforms.

The banning of conflicted remuneration and the introduction of a best interests duty and related obligations, along with new education, professional and ethical standards, have helped shift financial advice onto a more professional footing. And consumers have, overall, benefited.

So, we need to be vigilant about anything that might facilitate a retreat to the bad old days of “advice”, where product selling was a focal point and was the main mechanism by which advisers were paid.

Any changes that might be put on the table for debate or review – for example, by the Quality of Advice Review – need to be considered carefully for anything that might, either by design (or by so-called unintended consequences) reintroduce that flavour to how advice is delivered to Australians.

Advice needs to be more accessible and more affordable, but not at the undue expense of consumer protection, nor at the risk of compromising the quality of that advice. The title of the current review was always a little mystifying. As far as it’s possible to tell, quality really isn’t the biggest issue blighting the advice available to Australians.

On the other hand, affordability and accessibility are two real issues, but it would be a mistake to conflate those issues with quality, and to make advice cheaper by removing critical consumer protections, or to make it more accessible by allowing relatively poorly qualified individuals to provide it.

Paul Moran perfectly summed up the line the advice review needs to walk and the potential pitfalls for consumers. Right now, it’s relatively straightforward to work out who can and cannot give personal financial advice – are they on the ASIC Financial Adviser Register or not? – and what an adviser must do to ensure their advice is compliant.

It may be overly onerous on the adviser, it may introduce inefficiency to the advice process, and it may drive up costs for consumers. Those are valid points, and they need to be addressed.