A new class of financial adviser, which will also be available to life insurers, will be introduced alongside a crackdown on unscrupulous lead generation practices and an overhaul of the Compensation Scheme of Last Resort.
The measures, announced by Assistant Treasurer Daniel Mulino on Wednesday, were the culmination of a lengthy process initiated by his predecessor Stephen Jones.
But it was given added impetus following the collapse of two investment funds that wiped out more than $1 billion in retirement savings.
The failure of the Shield and First Guardian master funds, which impacted almost 12,000 Australians, exposed vulnerabilities across the financial ecosystem, Dr Mulino said.
"Access to financial advice has shrunk and bad actors have become more sophisticated, attracted by Australia's huge pool of retirement savings," he told the National Press Club in Canberra.
In response, Dr Mulino announced a crackdown on "predatory" lead generation practices, such as cold-calling and social media ads that drove consumers to switch their retirement savings to risky investment vehicles, such as Shield and First Guardian.
Unlicensed real time communication about superannuation will be banned, while licensees will be required to take reasonable steps to ensure lead generation activities comply with legal requirements.
The anti‑hawking regime will also be bolstered, with stronger consent requirements, limiting the exemption for financial advisers to existing clients and harsher penalties for breaches.
Oversight and governance of managed investment schemes will be toughened up.
"Audit and assurance requirements will be strengthened, and managed investment schemes will be required to notify ASIC when they freeze, suspend or otherwise restrict investors' ability to redeem their investments," Dr Mulino said.
The Financial Advice Association of Australia has previously called on Labor to crack down on lead generation practices, which can steer consumers towards inappropriate financial products.
"It was that predatory lead generation that amplified the misconduct in Shield and First Guardian. We had a single adviser who apparently signed over 6000 statements of advice," the association's chief executive Sarah Abood told AAP.
"The challenge we have is we also don't want to stop legitimate businesses from being able to talk to people, and there are a lot of people advisers need to talk to to do their job who aren't clients."
Ms Abood was not opposed to the new adviser class, but had questions about the scope of advice they would be able to provide given they would have less stringent education requirements than a general adviser.
Dr Mulino said prohibitions on commissions, bonuses and volume-based payments would be placed on the advisers, limiting the risk of vertical integration - advisers who work for the super fund pushing its products on a customer, even if it is not in their best interest.
Super funds have long advocated for the ability for in-house advisers to answer simple questions about members' finances.
"Millions of people will get simple but useful help with important financial decisions without having to pay thousands of dollars for comprehensive advice that might be more than what they need or can afford," Association of Superannuation Funds of Australia chief executive Mary Delahunty said.
But funds will also have to take on additional capital requirements and will be required to fully compensate members for losses made when a trustee has breached its obligations.
Self-managed super funds will be roped in to contributing to the Compensation Scheme of Last Resort in future, an industry-funded safety net that pays victims of financial misconduct up to $150,000.
The sustainability of the scheme has come under strain given the high losses incurred by collapses such as Shield and First Guardian.
"SMSFs are a legitimate and important part of Australia's retirement income system," Dr Mulino said.
"They are also part of the financial services ecosystem that benefits from the existence of a compensation framework."
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