Everyone's an adviser, but not necessarily a financial planner

The taskforce's latest progress report suggests that clients' best interests should be at the heart of financial advice, with legal obligations and incentives put in place to ensure they are. It says ultimately this requires that a "clear fiduciary duty" be placed upon them.

Institute of Financial Advisers (IFA) president Lyn McMorran says it is already looking to give the concept greater prominence as part of an overhaul of its Code of Ethics and Practice Standards.

"The main point of our Code of Ethics and Practice Standards is to put your clients' interests first and that really is the mark of a true fiduciary in terms of providing advice," she says.

Investment Savings and Insurance Association (ISI) chief executive Vance Arkinstall also supports imposing a fiduciary duty on investment advisers.

McMorran was equally supportive of the idea of regulating the term "independent adviser", going further to suggest that "financial planner" should be regulated too.

"Everybody's a financial adviser, but not everybody's a financial planner," she says.

"And I don't think anybody should be able to call themselves independent if they're receiving commissions or they're in any way tied to a particular provider."

McMorran added that some of the recommendations in the taskforce's latest progress report were already underway.

Arkinstall says the ISI has accepted the taskforce's call for greater transparency in fee disclosure, saying it already has a project underway to introduce a self-regulation standard for improved disclosure.

But he expressed disappointment that the taskforce had harked back to the Morningstar report that gave New Zealand's funds management industry a D minus grade.

Comments from our readers

On 5 August 2009 at 8:11 pm Independent Financial Planner said:

Why are financial advisers being targeted as being personally liable for advice they provide, when Company Management, Directors, Trustees, Fund Managers, Ratings Agencies etc etc have no such similar liability - even as a corporate structure let alone as individuals?

On 6 August 2009 at 1:58 pm John Commins said:

I am not sure which document "Independent Financial Planner" refers to when asserting that financial advisers are being targeted as "being personally liable for the advice they provide....".

The CMD Taskforce report says no such thing. It does say that "Financial advisers [should] be held accountable and investors receive appropriate redress when advisers breach the codes." And no one should have a problem with that.

"Personally liable" and "accountable" are quite different things. And yes, management, directors, trustees etc etc - are accountable under existing rules and no doubt will be more so under those proposed.

On 8 August 2009 at 10:07 am Michael Donovan said:

Many advisers have used the excuse to their clients that"it was the markets that caused your losses, not me." And to a degree, that is true. The current regulatory stuff needs to focus more on identifying the real problem areas, eg: where an adviser "diversified" across a bundle of finance companies, thinking it was good financial advising practice,or another who 'diversified' across several houses. The charging of fees to 'monitor' portfolios which are not really monitored is equally abhorrent, and costly to investors.The real problem areas seem to be non-focussed in the endeavours to regulate the industry, and seems more of a 'knee-jerk' reaction to the recent extra-severe market conditions?

Everyone's an adviser, but not necessarily a financial planner

Industry supports some ideas from the Capital Markets Taskforce and agrees there should be more definition around the terms "independent" and "financial planner."

Wednesday, August 5th 2009, 4:09AM 3 Comments

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