Patrick Middleton: Making sure that money men don't take us for a ride

Great Aunty Maude has died leaving you $200,000 in her will. A new four-wheel drive and boat beckon - until the sensible voice inside dictates caution.

So there you are, thumbing through the Yellow Pages looking for financial planners wondering what the initials CFP and FPIA mean, and do they matter? Can any of these guys be trusted and how much of your windfall will it cost to look after the rest?

Nagging away in the back of your mind is retirement. What does it really mean? A lot more fishing, a few overseas trips and catching up on those things put aside. But is that enough?

What to do in retirement, and the advice given by financial planners, are closely entwined because providing for retirement is often the motivation for seeking professional advice. And there is a wide range of advisers to choose from.

In addition to recognised financial advisers, there are lawyers, accountants, mortgage brokers and insurance consultants among those who from time to time provide that advice, though their main skills are in other fields.

Not surprisingly that has led to a wide range of expectations and outcomes, particularly when the advice has been driven by the commissions from selling specific products.

The Government has realised this, too, and, prompted by an International Monetary Fund report last May, is moving to regulate the financial planning industry. A taskforce is also due to make recommendations by the middle of the year on the quality of the financial information and advice that people should expect from financial planners.

Australia provides a basic model for what the Government and the industry should be aiming for. Its Financial Services Reform Act introduced a range of minimum requirements for education, supervision, business practice and disclosure. While the Australian regulatory regime would appear to be heavy-handed in other areas, the principles adopted are sound.

Within our regime, financial advisers are not required to be accountable to any particular governing body, hold minimum qualifications or undertake continuing education, or be bound by any mandatory code of conduct and best practice.

In essence, anyone can be a financial adviser. If some firms have well-established internal standards to manage these industry shortcomings, there is no compulsion to do so.

Accordingly, the regulation task force should make recommendations to achieve governance in these key areas:

* Any person providing advice on financial and risk-related matters should be licensed within a legislated framework.

* The licensing criteria should ensure that the adviser possesses a minimum standard of competence to provide advice in specific areas such as investment, insurance, financial planning and mortgages.

* Mandatory membership of an industry governing body with a clearly established code of conduct and continuing education structure.

* Full and frank mandatory disclosure should be made on qualifications, experience, fees and commissions, history of discipline and conflicts of interest.

* Approved governing bodies should be entirely independent - that is, they should not be providing financial services to advisers, neither should they be product providers.

* The establishment of an independent disciplinary body with powers to suspend operators in the industry.

Being the last cab off the rank gives the taskforce the opportunity to examine the costs and benefits of regulatory regimes in other OECD countries.

While the Government should establish the statutory framework, practical input from the industry is essential. Participants in the industry should then be responsible for implementing the requirements of the governing act.

Ultimately, the taskforce recommendations should deliver a structure that will give prospective clients a comprehensive understanding of who they are dealing with, the implications of recommendations made and full transparency on the costs involved. Anything less will be doing a disservice to them and the community.

Such a structure will provide quality advice delivered by skilled practitioners that meets client expectations and minimises the retirement burden on the state.

And in practical terms that means putting Great Aunty Maude's bequest to work in ways that let you achieve your lifestyle goals with more flexibility and comfort.

* Patrick Middleton is the chief executive of Spicers Wealth Management.