The Financial Services Council (FSC) is pushing for an for an independent governing body for the industry, a move which has been slammed by some big names in the sector.

FSC says it is so concerned at the level of public distrust in Australia's financial planners that it wants an independent Advice Competency Standards Board to be created. The board would comprise “key industry stakeholders”, such as the Australian Securities and Investments Commission and the Tax Practitioners Board, as regulators for the industry.

FSC chief executive John Brodgen says confidence will only be restored after clear efforts by the industry, including improved adviser education, increased powers for ASIC and more transparency in experience and ownership of institutions.

“Self-regulation is no longer a credible option for establishing higher standards,” Mr Brogden said this week.

But Industry Super Australia chairman Peter Collins has told Fairfax Media reporters that the proposal was a mere “distraction by the banks” and “an embarrassing back-flip”.

“Following an extraordinary lobbying campaign by the banks and financial advisers, the Future of Financial Advice Bill currently before the Parliament gives the banks and advisers their wish-list at the expense of consumers,” Mr Collins said.

“The banks now recognise they went too far and have lost the support of the Australian public. Consumer trust in the financial advice industry is in tatters.”

“I note the Financial Services Council is not supported by the Financial Planning Association.”

Shadow minister for financial services, Bernie Ripoll, told reporters that the Abbott Government had been left “humiliated” by the FSC's call for a regulator.

“This change of heart by the FSC, one of the biggest supporters of the Government's watering down of the Future of Financial Advice laws, is a major embarrassment for Tony Abbott,” Mr Ripoll said.

“Given this proposal by the FSC, it is simply unbelievable that the Abbott Government is so determined to reduce consumer protections in financial advice, particularly in light of what has occurred at the Commonwealth Bank.

“Labor will examine the FSC proposal closely including the costs associated with the extra level of red tape this will add to advisers,” he said.