Certification for financial advisers welcome

The Institute of Financial Advisers says the push to have financial advisers certified will bring others up to the standards that it has long required.

Ten to 14 per cent of the institute's members have "double professional status" – that is, they may be lawyers or accountants in addition to holding professional status as a financial planner.

IFA members are required to have the basic certificate or do four papers at diploma level plus two years of mentoring. Higher status goes to members who finish their diploma and do a case study. The institute also expects that members will adhere to its code of ethics and do continued professional development.

Chief executive David Hutton says the institute is still working through the detail of the proposals but it is concerned the transition needs to be more flexible both for new entrants and old timers.

New entrants need a certain amount of experience, which they cannot get under the proposed rules – a "catch-22" situation.

Mr Hutton says full disclosure of commissions and fees is already required, and disclosing conflicts of interests is just as important.

"You need to know if the person you're talking to is in fact an aligned or tied adviser. In other words, they can only give advice on the products of the company they work for. If you go into a bank, unless you're dealing with the wealth management people they're really only going to offer you bank products."

As to competency, Mr Hutton says IFA members are obliged to do adequate research but they can only glean so much from credit ratings and recommendations from research firms.

"And then also in some cases, as it now turns out, some of the prospectuses and offer documents put out by those finance companies were actually full of lies."