As the Senate prepares to dilute regulation of financial advisers this week, the Abbott government has also spurned calls for a Royal Commission into the Commonwealth Bank’s wealth management arms.

Consumer advocates are warning that the introduction of a national register of financial planners will do little to prevent more scandals like the Commonwealth Bank disaster.

The federal government announced details of the new register after rejecting calls from the Senate’s economics committee for a Royal Commission into the bank’s financial planning arms.

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The register will be launched next March and will include professional details of all financial planners in Australia, including records of previous legal breaches.

So far, CBA has paid $52 million in compensation to 1100 customers who were victims of unethical advice given by its advisers. The compensation bill is likely to soar, however, with the bank reviewing the quality of advice given to another 4200 clients.

CBA customers were victims of poor financial planning advice. Photo: AAP

‘No probe required’: Cormann

Finance Minister Mathias Cormann defended the government’s decision not to proceed with a royal commission, saying the CBA’s client compensation process known as the Open Advice Review Program should be given a chance to work.

“The Government considers that the most important focus today must be on resolving any legitimate outstanding grievances from affected Commonwealth Bank customers through the Open Advice Review Program and enforcement by ASIC,” Mr Cormann said in a statement.

“The Government considers that the Open Advice Review Program and the various related initiatives as undertaken by CBA should be given the opportunity to work and resolve any outstanding and unresolved legitimate issues for aggrieved CBA customers.”

However, the country’s peak consumer advocate CHOICE called on the government to review its plans to water down disclosure requirements of financial planners.

“Given the impact that bad financial advice can have on your savings or retirement, this is a welcome move – but the register isn’t alone going to clean up the advice industry,” a CHOICE spokesman said.

“What we need is strong consumer protections in legislation.”

Consumers need to approach financial advice with a critical eye.

FOFA reforms set to pass

The Senate this week is expected to pass the Abbott government’s controversial financial advice reforms, which will allow advisers to receive incentive payments from fund managers so long as they are not a described as “commissions”.

The reforms overturn the Gillard government’s blanket ban on incentive payments to financial planners.

With public trust in the financial planning industry at a low point, the Financial Planning Association (FPA) is hoping that the national register will help mend the profession’s poor reputation.

“Access to key information about planners will improve trust in financial planning,” said FPA chief Mark Rantall.

“It (the register) will also help weed out bad apples and provide protection for licensees, employers and Australians seeking financial advice.”

The peak body representing industry super funds also welcomed the introduction of the register, but wants it to contain more disclosure from financial planners about how they get paid.

Industry Super Australia chief David Whiteley said consumers needed to know whether their advisers accepted incentive payments from providers of investment products.

“The principal piece of information consumers need is whether a financial adviser is exclusively paid by the client or whether he or she also receives sales incentives from a product provider,” he said.

This greatly affects the quality and impartiality of advice.

In light of recent financial planning scandals Mr Whiteley said it was “extraordinary” that the government was diluting consumer protections under the reforms now before the Senate.