Customers come first … or do they?

So are we still to believe Australia has the best regulated banking system in the world?

Jacqueline McDowall, the nurse who lost her family home on advice from Westpac.

So are we still to believe Australia has the best regulated banking system in the world?

Or is it time to amend that to something more accurate? In these still early days of the bank inquiry it might be more appropriate to say the banks as institutions are well regulated — that is, they are not at risk of falling over.

But when it comes to service, especially financial advice, customers have been a second order issue.

The spectacular and worse-than-expected revelations from the inquiry have prompted Scott Morrison to announce a major strengthening of penalties for both rogue companies and, crucially, for rogue executives who will now face up to 10 years in jail and up to $1 million in fines.

Even with a string of scandals already made public by a vigilant media, we could not have guessed that financial advisers in our major institutions routinely broke the rules, that they put themselves before the interests of their clients while the regulators played catch-up. (Usefully, investments regulator ASIC has been given greater powers to ban advisers in the federal Treasurer’s announcement.)

Meanwhile, as financial advisers look worse by the day, financial adviser groups are fighting among themselves about what level of qualification is appropriate — the Financial Adviser Standards and Ethics Authority, set up last year, is not moving at the pace expected and its foundation CEO, Deen Sanders, has left the group after less than seven months in the job.

Bring on the higher penalties — they should at the very least act as a deterrent. Reform the amoral sales culture dotted across financial services and fix the fight over financial advisers qualifications immediately.

We can expect more executives of this era to disappear: AMP CEO Craig Meller is the first. We can expect banks to hive off wealth advice divisions. CBA’s move to float Colonial will be copied by others.

But in the meantime millions of people need advice. They need to find a way to steer their fortunes through what has been revealed as a treacherous system. The image of a tearful Jacqueline McDowall, the nurse who lost her family home on advice from Westpac planner Krish Mahadevan, who is still employed by the bank, will stay with everyone in this business for a long time.

As another era of reform looms over this perennially problematic system, how can you find a financial adviser who is trustworthy?

There are a range of questions you might ask an adviser but these are the top three:

● How are you paid?

Yes, commissions are supposed to be banned, but there are exceptions, for instance with insurance. We also know from the inquiry that FoFA (Future of Financial Advice) reforms have not been property implemented, particularly at the big banks. A planner should charge fee for service — on average it may work out at $1000- $3000 a year.

If you want to ensure you don’t pay more than you should for service, then do not accept “percentage arrangements” where the cost is linked to the size of your investment portfolio.

● Are you linked or tied to any other institution?

Independent advisers are much less likely to be corrupted by links to a major institution. Yet the reality is rarely simple. Some of the best planners are linked with institution including several in the upper reaches of The Australian’s Top 50 advisers list.

● What are your qualifications?

This is a quagmire. The commonly held RG146 qualifications are clearly not good enough. The CFP (Certified Financial Planner) certification is regarded as the top qualification. But then again, as a reader of these pages pointed out this week, ethics and qualifications have no correlation.

Put simply, the standards, the procedures and qualifications in this area are poor. The inquiry recommendations may ultimately advocate a wider clean-up. In the meantime you are on your own out there. Asking the right questions is the first step towards protecting yourself and finding an adviser you can trust.