The financial planning industry is conducting a widespread below-the-radar campaign to overturn a key element of the government’s reforms to financial services, one that will save Australians tens of thousands of dollars from their retirement incomes but is strongly opposed by the community.

Last April, then-financial services minister Chris Bowen announced a major package of reforms covering financial advice in response to the bipartisan report of the Corporations and Financial Services’ committee inquiry into the Storm and Opes collapses and other financial services disasters. Bowen’s package of reforms revolved around getting rid of commissions, introducing a fiduciary duty for planners toward their clients and establishing a new approach to financial advice fees, based on an “opt-in” approach.

“Opting in” would mean financial planners would have to annually get clients to renew agreements to receive financial advice in return for fees taken from their accounts.

Currently millions of Australians pay for financial advice they never receive or never ask for about their superannuation. They pay via fees of 0.5% automatically deducted from their accounts every year. This may only be a few hundred dollars are year, but the cost in foregone earnings and interest eventually amounts to tens or hundreds of thousands of dollars of lost retirement income — a cost that may eventually have to be borne by taxpayers if retirement incomes aren’t sufficient. Under some estimates, up to 4 million Australians are currently paying for advice they never get.

And because of the high levels of disengagement and lack of interest about retirement incomes, most of them don’t know or can’t be bothered undertaking the hassle of changing accounts. The financial planning industry has grown rich on the disengagement of Australians about their wealth management. The Cooper Superannuation Review also dealt with the issue of disengagement and based a series of recommended reforms on addressing it.

“Opting-in” would turn that disengagement on its head, reversing the benefit so that it flows to clients themselves, rather than financial planners, by requiring an active agreement to fees being deducted for advice each year.

That’s why financial planners don’t like it — they know they’ll struggle to convince Australians to continue to pay for something most of them have no interest in. And it’s why the Financial Planning Association launched an undercover campaign last year to overturn the Bowen reforms. They want “opt-out” rather than opt-in, thereby retaining the current arrangement where they benefit directly from people’s disengagement, because they know few Australian will make the effort to opt out.

The campaign isn’t being run by traditional lobbyists in Canberra. Instead, the FPA has sent its members to visit MPs in their electorates, encouraging financial planners to bombard MPs with letters requesting meetings to explain the virtues of “opt-out” and convince them to keep the current sweet deal in place.

The Association has a “meet your local member pack” on its website designed to give planners everything they need to tackle their local member, out of sight and beyond any lobbyist registers, in their own offices.

The campaign is crafted cleverly, and is designed to press the buttons of elected representatives. The documents pitch financial planners as a critical mentor in the lives of their clients, in fact almost family. “I have helped educate my clients on financial matters to instill good financial habits and enable them to make sound decisions throughout their lives,” says the form letter intended for MPs. Many financial planners are, other material says, “mum and dad type businesses” threatened by “regulatory uncertainty”. Financial advice is not just any transaction but “a long-term relationship built on trust, loyalty and openness”, of a kind “that enabled financial planners to assist so many clients during the recent Global Financial Crisis”.

The GFC reference isn’t an idle one. That’s the hook on which the financial planners hang their case against opt-in. “The proposed opt-in requirement could put at risk planners ability to provide a critical response during crisis situations and market downturns… Consideration must be given to how the client is to be protected when unforeseen economic or personal events occur and the planner is unable to assist because the client has forgotten to opt-in.”

What do Australians themselves think of the issue? Last month the Industry Super Network commissioned Newspoll to gauge consumer support for the reforms. Just under 90% supported the concept of a fiduciary responsibility for financial planners, and 85% of people who had a financial adviser preferred paying for their advice via a set fee or hourly rate, rather than having fees deducted from their investments. And nearly 75% preferred the idea of an annual renewal of financial advice fees, rather than an “opt-out” model.

The opt-in issue is to be decided shortly by new minister Bill Shorten, who replaced Bowen in the financial services portfolio after the election. Legislation implementing the “Future of Financial Advice” reforms is due mid-year, starting on July 1, 2012. Success by the sector in overturning “opt-in” — either within the government  or by convincing the independents to block it in parliament — would deliver a major win for the sector, one that will eventually cost Australians billions of dollars in retirement incomes.