Financial planners have given a rare insight into the problems of their industry courtesy of an angry week-long debate about the federal government’s Future of Financial Advice reforms.

Financial planners are the final holdouts against a wave of reform that is slowly overtaking the financial services industry in the wake of high-profile collapses like Storm and Westpoint, long-term under-performance by retail super funds and an increased focus on problems like trailing commissions.

While some impetus for reform has come from the sector itself, the government’s FOFA reforms, announced by Bill Shorten in April, will end — though only on a prospective, not retrospective, basis — the industry’s reliance on consumer apathy over superannuation to generate revenue from financial advice never asked for or received.

The “opt-in” requirement proposed in the reform package — under which financial planners would be required every two years to secure agreement from clients to the continued deduction of fees for financial advice — has earned the bitter opposition of some financial planners, and the Financial Planning Association has mounted a grassroots campaign to lobby MPs that financial planners, as humble mom-and-dad businesses, face disaster if the opt-in is implemented. As expected, the Coalition, which structures its financial services policy around the needs of financial planners rather than consumers, opposes the reforms. The FPA campaign has fooled at least one independent, with Rob Oakeshott announcing he opposes the opt-in requirement.

However, a debate last week on the respected Money Management website, which covers the sector, has revealed not merely splits over FOFA within the ranks of financial planners but some frightening stories of gouging. An article on a survey of financial planners on the impact of FOFA by Mike Taylor prompted a week-long firestorm between planners over the merits of the reforms, after one commenter suggested that any financial planner who couldn’t fulfill a biennial opt-in requirement wasn’t providing a worthwhile service to clients, and indeed could hardly even call them “clients”.

Amid claims of “socialism”, a conspiracy by trade unions to destroy the industry and an argument that an opt-in requirement was “restraint of trade”, a number of financial planners hit back. One compared financial advice to utilities, which you pay for to be available “whether you use them or not”. Another argued that financial planners work continuously for clients, drawing the response “”the work we do is continuous”.

“Really? Placing someone into a super platform and then leveraging an annual fee from them for the next 10 years is continuous work? Nice try buddy,” one commenter responded. Another suggested “if being required to justify on a regular basis the fact that you are taking a fee from someone’s savings is a massive problem, something is seriously wrong with the industry”.

More serious were the examples commenters began to give about what was going on inside some sections of the industry:

“Lets be honest, most other industries don’t give access to have your hand in someone’s wallet. Now commissions and ongoing adviser service fees are in SOME cases being taken from clients accounts without their knowledge. This is fundamentally wrong. I can’t have too much sympathy for businesses based on passive income AND yes this is a commonly used term within the industry. I personally know of banks holding books under no particular planners name just collecting trail and adviser service fees. I have seen 100M in client accounts with no direct planners assigned – Crazy!!! CBA in case you didn’t know.”

The Commonwealth Bank rejected the claim. “All Commonwealth Financial Planning clients are assigned to a financial planner or managed through servicing teams within the business,” a spokeswoman told Crikey. “We are committed to the delivery of services where fees for service are charged to clients.”

Another responded:

“As a current planner within the named organisation, I know of a book of similar size that was full of ongoing service clients and when the planner was shown the door for not hitting their KPIs (surprise, surprise) the client base was simply moved to orphan territory. That was over 2 years ago and guess what, the base is still in orphan territory, while the named organisation continues collecting service fees and the vultures within continue to cherry pick, churn, and charge new up-front fees as they grab TTR strategies etc. And this is one of the largest wealth management businesses in the country. What a joke!”

A third endorsed opt-in:

“The fact is that there is a majority of planners in the market that have hundreds if not thousands of people on their book that they haven’t provided a service to that validates them regularly receiving a fee/commission… you should only charge a fee to the clients that you have regular contact with, then after two years let them decide whether they still want to be your client…. my business has been fee for service for years now including risk and we ask our clients to sign yearly contracts with us, if they don’t sign it then they aren’t a client anymore and guess what… it pushed us harder, we went for ISO and made sure we did communicated with our clients more often, they appreciate that and our referral rate from each client is above industry standard.”

Another commenter also stated that they used wealthier clients to subsidise the cost of providing advice to lower-income clients, while an opponent of FOFA admitted “the uneducated product pushers do need to be brought into line. Some regulation is required”.

The claims prompted one commenter to note: “I hope for the sake of all financial advisers they don’t make their way into a mainstream publication as the poor old consumer might not find them so funny.”

Nor, perhaps, opponents of opt-in.