The controversial Future of Financial Advice (FoFA) reforms have finally passed the Senate, but hardly a single change remains uncontested. The main players in the industry have split along predictable lines.

Consumer groups and accountants say consumers have lost protections, whereas banks and financial planners, who employ or are linked to the bulk of advisers, have come out in strong support.

The Government says the changes are aimed at cutting red tape and needless cost. Financial Planning Association CEO Mark Rantall says the bits being removed were “political not practical” – sweeteners used by the previous Labor government to assure passage of the legislation through the hung Parliament.

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But Choice’s policy and campaigns advisor Erin Turner says consumers now have “a lot less protection”.

“The [previous regulations] made a big practical difference for consumers, in terms of being able to trust that the advice they were getting was independent and in their best interest,” she says.

“This is an industry where we have seen scandal after scandal. People have lost their houses and their life savings.” Certified Practicing Accountants CEO Alex Malley agrees that the changes “tip the balance too far the wrong way and erode important and hard won consumer protections”.

Industry Super Australia CEO David Whiteley says the primary concern is that Australians will not be able to get access to impartial financial advice “from somewhere in the order of 90-plus per cent of financial planners in Australia because they are employees of banks or insurance companies or tied to them through licencing agreements”.

But the Australian Bankers’ Association has accused industry super funds of misrepresenting the changes and running an anti-bank campaign.

For now, the biggest question seems to be whether FoFA ensures that financial advisors are always acting in our best interests, and not draining bank balances through fees for their own personal gain.

Given how contested and complex the issue is, we can’t give you an exhaustive explanation of the changes. But we have compiled some crucial tips to help you protect your hard-earned savings when seeking advice.

TIP 1. Keep track of any ongoing fees

Under the FoFA changes, you will have to opt-out, rather than opt-in, to ongoing payments linked to financial advice.

Under the old FoFA, a financial advisor would have to check in with you every two years to see if you wanted to keep paying fees.

If you didn’t write back within 30 days, the fee would automatically end. Not anymore.

You will also no longer receive annual fee disclosure statements. Thus, the onus is back on you to keep a close eye on what you are being charged, so stay on top of your fees.

TIP 2. If it sounds too good to be true…

…it usually is. Investing is boring, long term, and hard work, Mr Rantall says. Don’t kid yourself otherwise.

TIP 3. Ask if you are currently receiving scaled advice

Scaled advice is financial advice limited to a particular product or range of products, and is often cheaper than broader, more comprehensive advice.

For example, you might seek scaled advice on the best shares to buy, rather than the best investment to make.

Theoretically, you could agree with the bank-employed advisor to limit advice only to the range of products offered by that bank.

Under Labor, the protections that applied to scaled advice and comprehensive advice were identical.

Now, a client and a financial advisor can agree on the exact subject matter that the scaled advice is going to apply to.

So, you could approach a bank for share market advice, and instead be told that you should consider only one type of share, and then be asked to sign a form consenting to only being given advice about that particular share.

Thus, the line where scaled advice actually starts is now blurry, so be sure to clarify the starting line with your advisor.

TIP 4. Ask about bonuses or incentives

The FOFA reforms clarify what benefits can be paid to retail advisors under what is called a “balanced scorecard arrangement”.

According to Erin Turner at CHOICE, the circumstances in which up to 10 per cent of the annual income of a retail advisor (such as a bank teller) can be linked to sales targets has increased.

“This reintroduces a sales culture into what is presented as neutral, informative advice.

It’s not what consumers think they’re getting,” she says.

That said, a financial advisor must always put your interests first, ahead even of those of their employer, but always ask what bonuses or incentives your retail adviser does or will receive from any financial product they recommend.