While Australia conducts a review of superannuation and tinkers with self-regulation of financial advisers’ conflicts of interest, the US and UK are rapidly moving towards an outright ban on commissions and other forms of conflicted financial advice as they address the fallout from the financial crisis.

Three weeks ago, the Obama Administration released a response to the regulatory problems revealed by the financial crisis. The proposals include a new Consumer Financial Protection Agency that will have the power to impose a duty of care on advisers across all financial products requiring independent advice, opening them up to regulators’ sanctions and to punitive litigation if they breach their duty to consumers.

The Treasury paper also proposes that the Securities Exchange Commission be empowered to ban commissions and any other forms of remuneration that create conflicts of interest. Retailers will also be required to promote “vanilla” basic financial products that meet consumer needs in the same way as more complex and remunerative options.

Across the Atlantic, two weeks ago the UK’s Financial Services Authority announced a proposal to ban commission-based remuneration as part of an overhaul of retail financial advice from the end of 2012. The FSA also proposed that advisers be required to “make recommendations based on a comprehensive and fair analysis of the relevant market” and provide “unbiased, unrestricted advice”. The UK proposals will go significantly beyond those recently proposed by the EU, which in an April paper proposed (inevitably) greater uniformity of regulation and emphasised conflict of interest disclosure provisions. Commission-based financial advice is still heavily-entrenched in France (as it is in Canada).

In fact, the case for Australia to ban commissions is even stronger than elsewhere, given the compulsory nature of our superannuation system. Workers forced to direct 9% of their earnings into a fund and unable to access an industry fund should not have to watch a steady stream of their earnings redirected into financial planners’ pockets, especially if they make minimal use of their services.

While the Financial Planning Association and the Investment and Financial Services Association have both proposed a voluntary move away — partly — from commissions, there are stubborn holdouts in the sector who believe the whole issue can be wished away with more disclosure (in an industry already awash with gigabytes of unread product disclosures).

In New Zealand, there have been moves in the past year to improve the quality and professionalism of financial advice, but the Kiwis are closely watching Australian developments, especially given the dominant role Australian banks play in the New Zealand finance sector.

Fluctuating returns aside, the biggest challenge facing the superannuation industry — whether industry or retail super — is the high level of disengagement, or more correctly apathy, among Australians toward one of the most important financial aspects of their lives. This is in part fed by the growing perception that, like politicians, you can tell financial planners are lying because their lips are moving. The sector is in drastic need of an overhaul to provide a more professional and trustworthy image.

Australians need to know there is genuinely independent financial, easily-accessible advice available to them if they want it. But the Government’s recently-launched superannuation review isn’t due to report until June 2010. Change may be some time coming, unless the Government decides to act ahead of its own review.