The final package of financial planning reforms announced by Bill Shorten this morning is real economic reform, and for that matter real Labor reform. For all the criticism of Shorten and his ambition, he’s delivered a good package.

In particular, he’s held out against a strong under-the-radar campaign by the financial planning industry, revealed by Crikey earlier this year, against the critical “opt-in” requirement that will mean clients specifically have to agree to fees being deducted for financial planning advice that many never ask for.

Instead, along the lines of the compromise proposal trailed in the media by Shorten some weeks ago, there’ll be a biannual opt-in requirement, not an annual requirement as initially proposed by the previous minister Chris Bowen.

The campaign by the Financial Planning Association, which portrayed financial planners as mum-and-dad businesses threatened by the reforms, obfuscated the fact that the reforms are prospective, meaning that hundreds of thousands of Australians will continue to “receive” financial planning advice they never ask for and pay for via lower investment returns. Industry sources estimate this is costing Australians $5 million a day in fees.

Other reforms intended to remove the incentive for biased financial advice, including the ban on commissions and commission-like payments, volume payments and soft payments, are also prospective. These will take years, maybe decades, to have full effect, although the statutory “best interests” duty, more flexible advice structures and moves to professionalise financial planning, will start from when legislation is passed.

Nonetheless, there are major long-term economic benefits to Shorten’s package, even if they won’t materialise until long after this current generation of politicians has moved on. By ending the current arrangements whereby clients’ disengagement is used to funnel hundreds of millions of dollars out of long-term investments and superannuation accounts and into the pockets of financial planners, the owners of retail super funds — mainly, the big banks and AMP — and financial planning platforms, the retirement incomes of hundreds of thousands of Australians will be significantly higher than they would otherwise have been, reducing the call on future budgets. And working Australians will be the main beneficiaries.

The financial advice industry, the big banks and retail funds have accepted the need to end commissions, and tried to get in first with a half-baked transition to fees in 2009. Financial planners, however, have continued to fight to the death on the issue, despite the long lead time before the model of direct fee-based, best interests advice is fully established. The planners may yet seek to overturn key aspects of the FOFA legislation, exploiting the Coalition’s deliberate unwillingness to consider financial planning and superannuation as anything other than a feeding trough for planners and retail funds. Mathias Cormann quickly issued a press release this morning condemning opt-in and the banning of commissions. Financial planners will see that as an opportunity to derail the reforms if they can convince a cross-bencher that the reforms are a threat to them.

David Whiteley, of the Super Industry Network, emphasised the “carefully calibrated” nature of the Shorten package. “This is a moderate package — it increases consumer protection, both broadly in terms of issues like commission, and in detail, in areas like opt-in, but at the same time it’s generous to the financial planning industry with the prospectivity,” he told Crikey. “It protects consumers, retains a viable industry and allows financial planning to become a profession.”

The FPA itself held its fire, saying in a media release it wanted to see further detail but acknowledging Shorten’s efforts to consult. It repeated that opt-in was “not our preferred outcome and the FPA does not believe that opt-in should be legislated, but awaits the detail in the draft legislation …”

Don’t forget the long-term context for these reforms. The push emerged following scandals such as Storm and Westpoint. Failure to reform effectively now guarantees there’ll be a repeat of those debacles in a few years.