The Federal Government has quietly slipped into Parliament the second tranche of the Future of Financial Advice (FOFA) reforms defining “best interest” obligations.

The crucial components affecting the whole financial services sector, including general insurance brokers, will require individuals to “act in the best interests of the client in relation to…advice”.

The bill also requires advisers to “give priority to the interests of the client in the event of conflict between the interests of the client and the interests of either the individual providing the advice, the licensee or the authorised representative”.

Introducing the bill into Parliament, Financial Services Minister Bill Shorten said the best interest requirements will strike “a balance between certainty and flexibility for the adviser”.

Discharging this duty will be relatively simple in some situations and more involved where the circumstances are more complex,” he said. “This is a commonsense proposal which is long overdue.”

General insurance brokers will have a modified list of obligations to meet under the best interests regulations.

Mr Shorten says those advisers who do not act in the best interests of their clients will have to change their business models, but he believes the majority of advisers already comply with the regulations.

If an adviser does breach the new rules, they risk being banned from the industry.

Also included in the second FOFA bill is the ban on product commissions and volume-based shelf-space fees from product issuers.

The ban on commissions and soft-dollar payments will not apply to general insurance brokers. Nor will they apply to life insurance sales not bundled into a superannuation product.

The bill confirms what the Government had proposed in its draft legislation released a few months ago.

The ban on volume payments would still seem to include general insurance providers, because the legislation does not exempt them.

The legislation refers to fund managers, but also product issuers, thereby including both general and life insurance advisers that use an administration platform.

The bill is not clear on the topic as it defines a platform operator as “a financial services licensee that provides custodial arrangements”.

Mr Shorten says the bill will ensure platform operators put the most appropriate products on their menus, rather than those paying the highest fees.

He also says payment flows representing “reasonable value for scale” – will remain permissible”.

The bill will now head to the Senate and it is expected will be referred to committee scrutiny in the same way as the first FOFA bill.