The Australian Securities and Investments Commission (ASIC) has finally awakened from its long hibernation and presented the Government with a blueprint to protect investors from bad financial advice.

It's taken the loss of billions of dollars of investors' money through negligent financial advice, the biggest downturn in markets in 70 years and a very effective advertising campaign by the not-for-profit industry funds to rouse the regulator into action on the policy front.

ASIC's submission to the parliamentary inquiry to end sales-based commissions and put planners under a legal obligation to act in their clients' best interests comes as regulators in the US and Britain are already well advanced down the same track.

Even Australia's financial institutions appear to have moved ahead of the regulator by calling for more to be done. The industry could see the writing on the wall for commission payments and produced a plan to head off the wholesale changes that now look inevitable. Its plan to wean itself off commissions was going to take too long.

Under the industry's road map, commissions would only be able to be switched off by members of new super accounts, leaving hundreds of millions of dollars a year in commissions coming out of existing accounts for years to come. Although members are free to switch funds, many funds that charge commissions also have exit fees. Commissions have really been on the nose since the industry funds started an advertising campaign raising awareness of how they can distort advice.

ASIC's submission, if recommended by the parliamentary inquiry and accepted by the Government, would go a long way to bringing financial planning standards closer to those of other professions. Given the industry has grown out of the sales culture of life insurance, it is a very big step.

The global financial crisis has discredited, once and for all, the "self executing" regulatory regime of tick-box compliance. ASIC's performance since the Financial Services Reform Act came into effect in 2004 has been found wanting. While planners have been banned, these actions have only come after investors' money was well and truly lost and lives ruined.

Some people say ASIC is culpable for not using its already-considerable powers to better protect investors and there is truth in that.

The regulator has never fully tested the limits of its power, which is more considerable than it lets on. In time, when a full account is made of how billions of dollars were lost and the lives of many thousands of retirees devastated, ASIC will be judged in a harsher light than today.

For more than a decade, it has been testing planners with shadow shops, where people posing as investors are sent out to seek advice from planners.

It has known better than anyone else that unsuspecting investors were being exposed to unscrupulous planners. Those giving negligent, shoddy and conflicted advice, were, by and large, allowed to continue to operate under the licensing regime administered by the regulator.

Investors were none the wiser. They were told that as long as they used a licensed adviser, they could be reasonably assured of receiving, if not good advice then at least advice that was reasonable and appropriate to their personal circumstances. But the regulator knew that investors could have no such assurance. ASIC preferred to coach the miscreants and their employers in the hope they would reform themselves.

It chose to remain mute on policy improvements, even though it has been clear to even the most casual observer that the system in place was flawed and failing investors.

ASIC deflects blame in its submission for its lack of action by saying it can only use the cards dealt it by Government. Section 945A of the Corporations Act says a planner must have a reasonable basis for the advice. But it had no meaning and no deterrent value because what constituted reasonable advice was never tested properly in the courts.

Let's hope the proposals contained in the submission are reflective of a genuine change of heart and a much greater willingness to tilt the balance of the industry towards protecting investors.