Do all advisers need good character?

A court case involving an adviser who was denied authorisation has sparked a call for all advisers to be subject to the same ‘good character' threshold, but not everyone agrees the rules should be changed.

Friday, April 27th 2012, 6:34AM 8 Comments

The debate follows a landmark court case involving PropertyTutors director Sean Wood being declined authorisation by the Financial Markets Authority, which determined he wasn't a person of good character after he failed to disclose convictions.

Institute of Financial Advisers president Nigel Tate said the good character test used by the FMA for would-be AFAs should be applied to all advisers, regardless of designation.

"If an individual is giving advice to members of the public that they need good conduct and should be subject to the appropriate person test," he said.

"The FMA has got strict rules as to how they do it but they only have the ability to do it for advisers who are applying to be authorised. I believe the FMA should have the authority to reject any adviser's application if there's appropriate grounds."

Tate noted that the fundamental requirements of the Financial Advisers Act - to operate with care, diligence and skill - are applicable to all advisers, whether registered or not.

However, AFA Murray Weatherston of Financial Focus said there was no need to rush into making changes to the current rules.

"The rules we've got now should be given time to bed in rather than people relitigating things they failed to get brought in last time."

People in the industry should accept "them's the rules" and give the new regime time to settle down, Weatherston said, adding that there don't appear to have been many "horror stories" so far.

"I think the important thing is the adviser who got turned down had their chance in court to get it overturned and the court didn't allow it."

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Comments from our readers

On 27 April 2012 at 11:41 am CO said:

Do all advisers need good character?
Yes. Yes they do. Are we really asking this question?

On 27 April 2012 at 11:51 am Brent said:

Where do you draw the line, is someone with a speeding conviction an unsuitable person?, or maybe with a few silly pranks as a youngster? If that were the case many of our former Otago students would not be suitable persons.

On 27 April 2012 at 12:14 pm Independent Observer said:

My preference would be to see all industry participants re-submit their credentials to the Regulator, to satisfy a "fit & proper" person test.

At the end of the day, the industry as a whole will be judged by the actions of its participants.

On 27 April 2012 at 1:31 pm CO said:

Of course not Brent, each case should be based on it's own merits. However, where misdemeanors/convictions/fines etc are relevant to the industry, or have relevance to the individuals attitude to regulation, rules, professionalism etc etc, thne surely it must have an effect on their ability to give sound advice to individuals?

On 27 April 2012 at 1:55 pm Graeme Barrell said:

Now that the industry has attracted public
support for introducing regulatory measures, let's not degrade these appropriate steps, and run the risk of once again being embarrassed by poor standards of selection. "Keep the ratbags out of our wonderful industry"!

On 27 April 2012 at 2:19 pm Hissing Sid said:

A credit check should also be mandatory, how can someone give financial advice when they can't manage their own affairs. This is compulsary in the UK.

On 2 May 2012 at 4:23 pm Dirty Harry said:

I thought the whole idea was to try and help prevent MORE horror stories!! What reason is there to just accept the regulations as they are - especially if we see potential for new horror stories? For how long? The regulations were pretty much written (and re-written) on-the-fly, so why stop now?

Being accepted onto a register ought to mean something in itself. To the public (whose opinion on the subject matters most) it implies competence, knowledge, skill. It evokes trust. It lends credibility. It implies accountability.

Registered builder.
Registered plumber/gasfitter.
Registered financial adviser.
Registered medical practitioner.
Registered teacher.

Why should registered financial adviser be the odd one out?

On 10 May 2012 at 10:31 am Andy said:

Dirty Harry - I agree - the regulations will need to be modified as time goes by to close the loops. The trouble is, the more regulation we have, the more loopholes get created. Sometimes less is more. As for the registration - I agree to the registration, but there should be a scale of some sort - we all know of bad registered teachers, plumbers, builders, medical practitioners - so why not financial advisers? (And I am referring to AFAs here as well). The challenge is differentiating the good from the bad in a publicly acceptable way...

Any suggestions - write or email to...