The peak body representing the financial services industry has admitted that an independent external regulator is needed to stamp out unethical and at times unlawful behaviour.
In the face of worsening image problem after a string of financial planning scandals, the Financial Services Council (FSC) has recommended that the federal government establish a statutory body to regulate professional standards within the industry.
The Council's chief executive John Brogden acknowledges the recommendation reflects the deepening public distrust of financial advisers and the low qualifications to enter the industry.
"The reality is that public trust is so low, public expectations are so low, yet public demand for advice is so high that we have to acknowledge that self regulation has failed and we need to go to government and independent regulation," Mr Brogden told the ABC.
"At the moment the standards are far too low - everybody agrees with that. We've seen lots of different suggestions as to how they might be improved. We've decided to go right over the top of all of those and call for the creation of a standalone independent statutory body."
"Self regulation is no longer a credible option for establishing higher standards."
The surprise recommendation to the parliamentary joint committee into adviser competency and the Murray Review into the financial system is being seen as the financial planning industry putting up the white flag in a hostile consumer and government environment.
The FSC paper calls for the creation of the Advice Competency Standards Board (ACSB) which would regulate professional standards and the education of financial advisers.
While the FSC does not specify educational standards, it says the Board should determine minimum qualifications which could include a single national exam for potential advisers,
John Brogden acknowledges that higher regulated standards could hurt veteran planners who have been in business for decades especially if they don't already possess a university degree.
"I feel very sorry for good professional advisors who have always acted ethically, have very happy clients, have always acted in the best interests of their clients who have been dragged down by bad advisers," Mr Brogden said.
"For them I feel very sad that their reputations have been tarnished."
Mr Brogden says the Board should be funded by the financial planning industry but have an independent chair and directors.