Financial advisers won't have to dob in colleagues

Ross Butler. Photo / Supplied

Financial advisers will no longer have to dob each other in for ethical breaches under a completed version of a draft code of conduct.

The draft code must now be approved by the Commissioner of Financial Advisers and Commerce Minister Simon Power before it is set in stone.

The first version was put together in April, but after several months of consultation it has been altered to fit in with the new Financial Advisers Act and with recommendations made by the industry and consumer groups.

Code committee chairman Ross Butler said the dob-in function had been dropped because it was now included in the act, although it was no longer compulsory for advisers to report on each other.

"Because the act itself is not compulsory, we couldn't go further than the legislation [in the code]."

It had also altered the definitions for independent financial adviser. Butler said it had not been watered down but had been made clearer.

"The reality is most people won't be able to call themselves independent."

The code had also widened the number of qualifications that would be accepted to meet some of the new minimum standards required to qualify as an authorised financial adviser.

But much of the final draft had not been changed.

"What hasn't changed is the simplicity, clarity and consensus around making sure it was written in a style that could easily be understood by the consumer."

The code was designed to be principle based rather than prescriptive and it remained committed to ensuring ethical behaviour and good client care.

Advisers who become authorised will have to adhere to it from December 1. All those wanting to become authorised have until June 30 to do so.

Butler said advisers had had plenty of warning about the changes and should have no reason to grumble about the time-frame.

The code was important to regaining investor confidence and would help boost that alongside the act and industry buy-in. But he said consumers would need more education to help them understand their new rights and dispute resolution.

People who believed their adviser had breached the code would be able to complain directly to the Securities Commission.

Commissioner of Financial Advisers David Mayhew said he expected to complete a review of the draft by mid-August.

"The code will play an important role in establishing the professionalism and integrity of financial advisers." If he approved, the draft would go to the Minister of Commerce for approval.