As the industry tried to gain momentum and credibility in the late 1990s and early 2000s, confidence in the financial planning sector took a blow with the release of ASIC's 2003 shadow shopper report into super switching, which condemned the quality of advice provided by financial planners.
The results of ASIC's follow-up report released in 2006 showed slight improvement but exposed an industry still riddled with conflicts of interest.
Among other things the report showed non-compliant advice was six times more common when the adviser was receiving a commission payment and three times more common if they were recommending a product associated with their Australian financial services licensee.
In addition, where a fund switch was recommended, 62 per cent of licensed advisers recommended a higher fee fund, compared with 22 per cent that recommended a lower fee fund.
Numerous moves were made to rectify the problems uncovered, with the FPA suggesting advice definitions under law should be changed as terms were used too loosely.
However, the time taken to implement these initiatives has not served to boost people's confidence.
Three years on, definitions such as adviser and financial planner are finally being reviewed by the Parliamentary Joint Committee on Corporations and Financial Services through its inquiry into financial products and services, also known as the Ripoll inquiry.
Before this, consumer confidence had already taken a hit in 2006 with Westpoint Group's collapse, which left investors around $300 million out of pocket.
It was expected planners would feel the fallout for years to come as Westpoint had paid significant commissions to advisers who recommended that clients invest in Westpoint's schemes.
It was one event that also left many people questioning ASIC's ability to regulate the industry and why the regulator was so inactive in being able to protect investors' money.
ASIC also copped criticism as it was reported at the time that the regulator had known about discrepancies in Westpoint schemes two years prior to the group's collapse.
Despite the bad news, investors for the most part continued to enjoy bull market returns. Investing was easy and investing was fun as individuals entered 2007 blissfully unaware the year would end in the most significant global financial turmoil of recent times.
Warning signs emerged when hedge fund manager Basis Capital and property investment group Fincorp went under before the year was out.
Evidence of the global financial crisis (GFC) then gave rise to a more fearful market as the love affair many consumers had for investing during the bull market died off as the bear market set in.
It was a turning point in encouraging investors to educate themselves as the GFC drastically changed consumer sentiment, with consumers also starting to look to risk and the preservation of capital rather than returns as the most important investment criteria.
This was highlighted in October 2008, when the federal government guaranteed fund balances up to $1 million for Australian deposit-taking institutions to promote financial system stability in Australia.
Rather than promote stability though, the move caused a rash of redemption requests, particularly from the mortgage fund sector, as investors became fearful of how secure investments that were outside the guarantee really were. It prompted numerous fund managers, including Perpetual, Australian Unity and Axa Australia, to freeze redemptions on their mortgage funds, a situation that is only now beginning to ease.
The onset of the GFC also led to investors becoming more interested in capital guaranteed products, such as Axa North, which was rolled out in late 2007. And on the back of growing demand, some capital guaranteed products have been structured in a new manner, with JP Morgan's decision to provide the capital guarantee component for other manufacturers' products a prime example.
The bull market love affair was definitely over as a 2009 RaboPlus DIY Investor survey revealed investors all enjoyed investing less in 2009 than in 2008.
Consumer confidence then hit a road block again with the collapse of financial services firm Storm Financial.
The fact Storm Financial was a financial planning dealer group, coupled with other GFC losses, rocked perceptions of the advisory sector once more.
But people's faith in the regulator was continuing to suffer as well.
In the lead-up to Storm's downfall, the group was audited and had been compliance checked by ASIC and, much to the concern of many, still got through with flying colours.
Recently the head of the Ripoll inquiry, Bernie Ripoll, said there was not necessarily anything wrong with the organisation as it stood on paper, or in its systems, or the checks and balances that went with determining whether or not the organisation was meeting its obligations under law.
In an attempt to improve the situation, the Ripoll inquiry is currently reviewing the role and responsibilities of the corporate regulator, with Ripoll commenting that scrutiny of the regulation process was a natural result of the collapses of major financial entities.
The situation was exacerbated by market murmurs that Storm was dodgy months before it went under.
The collapses of Great Southern and Timbercorp were to follow hot on the heels of Storm's demise, wiping out more than 50 per cent of the market.
Such was the magnitude of this kick in the guts to investors that some preliminary data suggested almost no-one intended to revisit the sector.
An offset to all the bad news, however, was that consumers became savvier about their investing habits.
The number of self-managed superannuation fund registrations spiked, for instance, as negative investment returns drove more people to take control of their superannuation savings with the belief they could do it better themselves.
On the plus side, the end of the GFC has been signalled and no doubt improvements to the industry will be made as a consequence of the Ripoll inquiry.
And with ASIC set to undertake another shadow shopper exercise this financial year, and the FPA pushing to phase out commissions paid to advisers by 2012, perhaps confidence will soon be on the way back up.
