Concerns have been raised over the “best interest” regulations in the latest Future of Financial Advice (FOFA) bill.

The Financial Services Council (FSC) has slammed the proposal as “unworkable” in practice unless it is amended.

CEO John Brogden says the best interest duty would leave the industry grappling with uncertainty and would increase the cost of advice.

“This duty undermines a core objective of the FOFA reforms – to increase the availability and accessibility of advice,” he said. “Our legal advice tells us this legislation would be very difficult to work with from the point of view of understanding what it means and how it would apply in practice.”

Mr Brogden says that without a clear and objective measure to test whether an adviser has acted in the best interest of their client, they will be exposed to significant risk.

Association of Financial Advisers (AFA) CEO Richard Klipin told insuranceNEWS.com.au while the principle of best interest sound fine, there is still work to be done on the detail of the legislation.

“We are concerned about what advisers will need to do to meet the requirements as we believe the devil is in the detail,” he said.

National Insurance Brokers Association (NIBA) CEO Dallas Booth also agrees the bill will need to be scrutinised very closely.

“We are pleased the Government is listening to stakeholders in the industry, but we are still reviewing the bill,” he told insuranceNEWS.com.au.

After the experiences of the first FOFA bill, many lawyers and associations have developed a cautious approach to the second bill, reading it line by line because any problems will emerge in the detail.

But not everybody has been attacking the Government’s latest reform for the financial services sector, with the Financial Planning Association (FPA) and the Industry Superannuation Network (ISN) supporting the latest bill.

“As a whole, the FPA believes that the reforms announced in FOFA Tranche 2 are supportive of the financial planning profession, our members and all Australians,” CEO Mark Rantall said.

But the association has raised some concerns on group life insurance commissions and soft-dollar payments based on the location of the training.

“The FPA also has a concern with the definition of group life insurance and believes the current definition within the legislation could cause some unintended consequences and costs for consumers as a result,” he said.

“We do not agree that ‘location’ should be a factor. The FPA believes that if an adviser can participate in a legitimate professional development conference, it should be irrespective of whether it is in Australia or overseas.”

ISN CEO David Whiteley says the latest legislation will provide a fairer financial advice system for all Australian.

“The best interests test and prohibition of conflicted remuneration represent key planks of the FOFA reforms,” he said.

“Importantly, the new measures mean that financial planners will no longer be able to receive commissions from product providers to recommend certain super funds to their clients.”