Martin Hawes: Client always comes first in new code of conduct

Opinion

Being a financial adviser is a serious business.

Good financial management is not simply about money. It is about getting a happy fit between the family and the life that it wants; making sure that the family has its finances arranged in the best possible way so that it can live the way it wants and deserves.

The tragedy of the finance company debacle is not simply about counting the money that has been lost but counting the lives that have been wrecked.

A Bridgecorp investment of $50,000 that a retired couple has to write off is not just a number - it represents not being able to visit their daughter in Sydney or continue their membership of the local golf club.

Financial advisers take on a position of great responsibility, giving advice that may make or break their clients' lives.

So any sensible person will welcome the code of professional conduct being proposed for financial advisers.

Released last week, this code is the work of a specially appointed committee and, when it comes in later this year, will be the culmination of greatly overdue regulation of financial advisers.

Although the code is in a draft form for public consultation, it is likely to be established in much the same form as now. As such, it is worth reading.

The code sets standards in four sections: ethical behaviour, client care, adviser knowledge and continuous training. The first standard is the best - a requirement for financial advisers to put the clients' interests first.

To me this is the essence of professionalism and is something that has been painfully lacking from the sector in the past.

In many cases, the big problem has been that financial advisers put their own interests before their client's as they rushed for the high commissions that Bridgecorp and others paid.

Various other standards are designed to protect the public and improve the reputations of financial advisers: they must provide enough information for their clients to be able to make informed choices; they are expected to dob in others whom they suspect are not complying with the code; all advisers must have a disputes resolution scheme in place, and clients' money must be properly looked after.

Elsewhere the code sets out the education and qualifications that advisers will need. There is little grandfathering, and financial advisers will have to attain academic qualifications to be able to practise.

Taken as a whole, this draft code seems reasonable. It won't happen overnight but these regulations will lead to improvement in the quality of financial advice.

* Martin Hawes is a financial adviser. His disclosure statement can be found at www.martinhawes.com