The latest changes to the Future of Financial Advice (FOFA) regulations have divided the financial services industry.

While the changes have been supported by the Industry Super Network (ISN) and consumer associations, the criticisms of life insurers and one of the two associations representing financial advisers reveals considerable disquiet over the purpose and clarity of the legislation.

Suncorp Life CEO Geoff Summerhayes told insuranceNEWS.com.au the amended FOFA bill is “a disappointment for the industry”.

“We have always supported the FOFA reforms in principle, but what the industry needs is certainty,” he said. “The bill does not have certainty on what is best advice, opt-in or scaled advice.”

Financial Services Minister Bill Shorten told the House of Representatives last week the final details of many of the FOFA reforms will be decided by the Australian Securities and Investments Commission (ASIC) through regulatory guidelines.

Mr Summerhayes says the legislation has been set at a high level “but the specifics will have to wait until ASIC drafts the guidelines”.

“What the industry has called for is certainty and it is disappointing that we are still awaiting what will be the specifications,” he said.

“Today we and other insurance companies, are setting our budgets for the 2013 financial year and we are trying to do that without a level of certainty of what we will have to do to comply.”

Association of Financial Advisers CEO Richard Klipin says he has “grave concerns” about last-minute amendments that apparently resulted from side deals with the ISN.

“We are disappointed at the outcome and sceptical about the merits of this ambiguous deal,” he said. “It demonstrates that the Government has played favourites and has not listened to the industry.”

Mr Klipin says the FOFA bill as it now stands, favours ISN and union industry super funds at the expense of other sectors of the financial services industry. 

Financial Services Council (FSC) CEO John Brogden says the bill fails to provide certainty for consumers and financial advisers and the FSC will therefore not support it.

“Our concern is that the legislation leaves it to ASIC to administer opt-in without any certainty as to what they require to provide an exemption and what the professional standards will be,” he said.

“Our fear is the lack of clarity around the best interest duty will expose financial advisers to significant risk and see many disputes end up in court.”

The Financial Planning Association (FPA) has been accused of doing deals with the ISN on issues like opt-in and the “best interest” duty, but CEO Mark Rantall says the final FOFA legislation ratifies a hard line drawn by the association.

“That line fundamentally promotes those who act as respected financial planning professionals united through collective membership of their professional body and upholding a common code of professional conduct,” he said. 

“The amendments to the FOFA reforms help to expedite that journey which the FPA started more than 12 months ago.”

The FPA’s praise for the amended bill was been joined, not surprisingly, by the ISN, consumer organisation Choice and the Financial Services Union (FSU).

ISN CEO David Whiteley says the bill will bring about the “cultural changes needed for the financial advice industry to attain its aspiration to be regarded as a profession”.

“For the first time financial planners will be required by legislation to act in the best interests of their clients, and sales commissions and other forms of conflicted remuneration will be prohibited.” 

Choice Chairman Jenni Mack says the FOFA bill is the conclusion to a 20-year campaign by the consumer group to end “secret payments that have distorted advice and eroded consumers’ hard-earned savings”.

“These reforms put consumers in the driver’s seat when it comes to seeking financial advice and ensures advisers have to act in their clients’ best interests,” she said.

“Choice encourages industry associations to develop ASIC-approved professional practice standards that obviate the need for opt-in.” 

FSU National Secretary Leon Carter says the bill will herald a shift in the way the whole financial services industry does business.

“The passage of this bill heralds the beginning of a cultural shift in the finance sector… away from short-term thinking and risky remuneration practices to something more sustainable and professional.”