1. How It Was Prior to reform, there were serious problems in investment advising mainly revolving around commissions based on FUMs. This encouraged advisers to:  recommend excessive leverage  put clients into risky products which pay high commissions  not advise clients to make sensible investment decisions if they do not generate commissions (e.g. home ownership)

2. How It Was (continued) Investment advice was fragmented—many advisers who were recommending on significant investments were not subject to the regulatory net (e.g. property). Most advisers were poorly qualified. Clients lacked financial and investment literacy and were often irrational.

3. FOFA Reforms were introduced on 1 July 2013. They included:  a requirement that investors act in the best interests of clients  prohibition of various conflicted remuneration structures (RG246)  retail clients must receive a fee disclosure statement (FDS)

4. FOFA (continued) Asset based fees have been largely outlawed which will lead to greater reliance on upfront fees. Unintended consequences?  deter clients from taking investment advice  increases the volume of paperwork which clients may not read  reduces the sensible use of leverage in investment portfolios

5. What Remains to be Done? There is a conflict of interest in investment advice being supplied by product providers. The industry is still fragmented, e.g. investments in property and insurance products still receive separate treatment which discourages appropriate diversification. Education of advisers and their clients is deficient. Advisers and investors should take an overall view of portfolios (time horizon). ASIC could take a more active role in risk management.