The Government may need to use more than one term to replace ‘general advice’ in circumstances where products sold with no advice are leading to consumer detriment, according to the Australian Securities and Investments Commission (ASIC).
The regulator has told the Productivity Commission (PC) that it is currently conducting a review of consumer experience of general advice traversing aggregator and comparison websites, financial product provider call centres and a range of other sources.
In a follow-up submission to the Productivity Commission (PC) inquiry into competition in the financial system, ASIC has backed the relabelling of ‘general advice’ as a useful step but has warned that it may not go far enough.
“…this proposal, on its own, may not address broader issues relating to financial advice, including the need to raise the quality of advice, whether ‘general’ or ‘personal’, and to increase access to financial advice,” the submission said.
“For example, we are concerned about products that are sold under a general advice (or sometimes, ‘no advice’ model), where that model may lead to consumer detriment—for example, where the complexity of the product means that personal advice might be more appropriate, or other factors in the sales process may negatively impact consumer decision making,” it said.
The regulator noted that, additionally, some industry participants had expressed some concern that there was a mismatch between demand-side expectations to receive certain personalised information when purchasing a financial product, and their capacity to provide this information under the current regulatory framework.
“Regardless of whether these concerns are validly held, we expect this tension will increase as:
(a) industry’s capacity to provide useful and persuasive information increases with its capacity to collect and analyse individual consumer data and understand consumer behaviour; and
(b) based on their experience in other parts of the digital economy, consumers’ expectation that they will have access to new forms of personalised guidance and assistance increases,” the submission said.
It said that a risk in any expansion of general advice models was that there were fewer regulatory requirements associated with providing general advice.
“In particular, the record-keeping requirements that apply to personal advice do not apply when general advice is provided. This means that, if a consumer wishes to make a complaint about the quality of the ‘general’ advice received or the damage that it lead to, they will not have any records of the advice to rely on. This lack of records also hinders ASIC’s ability to monitor this conduct,” the submission said.
