'Independent' advisers face tougher line

Ross Butler

Most New Zealand financial advisers won't be able to call themselves "independent" under a new draft code of conduct which is expected to become law by December.

Under the code, which was released last Thursday for consultation over the next six weeks, advisers who charge commissions or whose business is owned by a company that supplies investment products can't call themselves independent.

That, says code committee chairman Ross Butler, will mean most advisers won't be able to give themselves a title that has been used by many for years.

Butler said the decision to define independence had been driven by consumer group consultation.

"They were concerned, as we were, around the integrity of the proposed systems."

The conditions of the terms were designed to be consistent with the Australian regime.

A new industry association set up in Australia for independent advisers found just 14 met the criteria out of thousands of advisers.

Butler said it was important that the public knew what they were getting when they wanted advice.

"It's all about transparency."

The code also sets out the minimum standards of ethical behaviour for advisers, client care, adviser competency and ongoing professional training.

Butler says the code demands that advisers place their clients' interests first and only give advice in areas or on products they are qualified to do so on.

They must not bring the industry into disrepute and must ensure they give consumers enough information to allow them to make an informed decision.

The code encourages advisers to dob in those not meeting the standards to the Securities Commission.

Consultation on the code closes on May 7.