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CONSUMERS now have a simple cost-free recourse over the sale of any financial product.
They will be told how much the adviser is being paid by the financial institution to sell them the product and what risks are involved in buying it.
These new rights form the basis of the Financial Services Reform Act.
"If something goes wrong the consumer will have more effective, cheaper and more practical recourse," says Michael Dunn, director of consumer communication at the Australian Securities & Investments Commission.
While many in the financial services industry, like the Financial Planning Association, have welcomed the changes, it is warning that consumers will be swamped with long, legalistic documents, a point the Australian Consumers Association concedes may cause some confusion.
The first thing everyone will notice is when they ask bank staff about term deposits, or inquiring from a travel agent about the best insurance for a trip.
An answer will constitute advice, which is no longer permitted unless the person is authorised by an ASIC licence.
To obtain a licence the adviser must reach a certain level of training. It applies to financial planners, stockbrokers, insurance brokers and even extends to furniture removalists and car dealers.
The only major exceptions are those providing credit and loans, like mortgage brokers, which fall under State laws.
"Consumers should only deal with licensed businesses because they get the full range of consumer protection," says Dr Dunn.
"You still have to shop around to buy the product that best meets your needs, but every licensed business has to have a proper process to deal with complaints, they just can't fob you off."
That decision is binding on the financial Provider, but the customer retains the right to take legal action.
Catherine Wolthuizen, financial policy officer with the Australian Consumers Association, says this reform "is probably the most important aspect of the PSRA".
One of the more controversial reforms is the amount of documentation the seller must give the client.
On arriving at the office for the first time, the consumer will be given a Financial Services Guide spelling out what the firm is, that it has a valid licence (it can be checked at www.fido.asic.gov.au) what services are provided and fees and commissions charged.
After consultation, the client will be given a Statement of Advice essentially a tailored plan that takes into account your personal objectives, financial situation and needs.
It will also tell the client of any likely conflicts of interest, such as "soft dollar" commissions.
If your adviser gives only general advice, it does not have to provide an SOA.
A third document, the Product Disclosure, will detail the product such as a life insurance policy or a managed fund and if it invests in things like high-risk stocks.
"The documents exist for consumer protection," says Dr Dunn.
"They contain things consumers need to know. They may not need to know everything at once and understand it instantly but if you are going to invest $5000 you would want to know if the only reason your financial planner sold it to you was to make the commission."
Last year a joint study by ACA and ASIC found many financial planners gave poor advice to clients and much of that advice was influenced by commissions paid to planners by big financial institutions.
In just over half the cases studied, the advice was rated "very poor", "poor" or "borderline.