Could advisers move to general advice?

Moving to general advice could be an alternative to providing holistic advice for advisers disgruntled with the current regulatory requirements, but they will have to get past the stigma, according to a risk broker who has made the shift.

Tony Smilevski, insurance broker for Tony Insurance, said the Financial Adviser Standards and Ethics Authority (FASEA) education requirements, as well other regulatory demands, had motivated him personally to pursue providing general advice instead of personal advice.

“Personally, I’ve done full advice and general advice when it comes to [risk] insurance I’ve done holistic advice as well with a few of the bigger licensees,” Smilevski said.

“Recently I moved away from doing full advice because of everything going on. I’ve passed my FASEA exam, I’ve got my education requirements ticked off but I thought there was no point going on doing risk-only advice in the post-FASEA world, it didn’t make sense.

“I know a lot of advisers are in that boat where they don’t know what to do; they’re either not passing the FASEA exam or they just not seeing it as being profitable to run a business that maybe specialises in risk-only [advice].”

Smilevski said it was a “massive mental shift” for an adviser to look at general advice as an alternative option.

“Because the way we currently look at it is general advice instead of personal advice is not good enough,” Smilevski said.

“And the stigma around it being sales-y, which in a lot of cases is warranted because that’s what happens with these things, is really what plays in a lot of advisers heads.

“Now they’re in this position that they don’t know general advice is an option so they’re leaving, clients are orphaned and the worst part of it is clients being turned away from an adviser because they’re not worth to the practice.

“It’s mind boggling to me, I walked into the industry to help people and now it’s gone the opposite, but I’ve found a way to do it.

“But we’re talking 95% of advisers out there either have a negative view of general advice or don’t even know that it’s an option.”

Smilevski pointed to another real-life example of a struggling adviser who had found success with this the changeover.

“A real-life example, there’s a 64-year-old adviser, who hasn’t been doing much risk lately because of the compliance requirements with the SoA [statement of advice] and everything else,” Smilevski said.

“We put in front of him the option to do it as general advice, so obviously not providing an opinion but still preparing quotes for people.

“And he’s been writing more business than he has in the last four or five years as a full-advice adviser.”

Despite all the changes that were meant to help general consumers, Smilevski said it only priced out people.

“Advisers are turning clients away that aren’t ready to get advice or don’t want advice or their premiums on their insurance is really low,” Smilevski said.

“Every adviser knows this; it’s just priced out anyone below a certain threshold. Advisers are becoming far and few between, especially the holistic ones.”

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This doesn't make any sense to me. If you're preparing quotes for clients then how can it be general advice?

The distinction between personal and general is not who prepares a quote, but the method used to prepare it; RG 244.37

Hey Tony, FYI - RG244 has not been updated by ASIC since December 2012 therefore the guidance is pre-FOFA (i.e. 01 July 2013) as well as pre-FASEA (i.e. 01 January 2020) so relying on this is perhaps a terrible idea as even ASIC themselves have admitted that the RG needs to be updated because it is no longer fit-for-purpose to meet both legislative and ethical compliance obligations!

Not sure how you do that without leaving yourself exposed as slipping into implied advice is really easy or knowingly put in incorrect cover amounts for a clients needs as you haven't advised them on what the correct amount is.

Sounds like a real tight rope walk to me.

The ISA (union super) have tried this for years and keep failing to comply with the law.

I'd be interested to hear more from Tony whether he is charging fees and/or receiving Insurance commissions for general advice.
If you are preparing a quote, you might have considered the clients Objectives, Situation and/or Needs in the process - in which case it's not general advice.
However, if there is no recommendation whatsoever, and the client is deciding the level of cover, comparing product terms and options, thinking through the issue of inside or outside super and then deciding which product to acquire if might be feasible.
If product comparison websites can do this, why not an Adviser I suppose. You'd want to have a very robust process to manage it under general advice.

Carl, you've hit the nail on the head, that is exactly how GA works. It is much less complicated than people think.
There are no fees charged and you do not consider the clients financial situation, objectives or needs. Remuneration is commission only.

You would just have to be extremely careful as to what was said to clients and have a extremely robust process as "class of financial products" might trip you up.

Meaning of financial product advice
(1) For the purposes of this Chapter, financial product advice means a recommendation or a statement of opinion, or a report of either of those things, that:

(a) is intended to influence a person or persons in making a decision in relation to a particular financial product or class of financial products, or an interest in a particular financial product or class of financial products; or

(b) could reasonably be regarded as being intended to have such an influence.

Putting aside the other obvious problems i see with trying to say this is 'general advice', surely come 1st Jan 2022, no insurance company is going to pay a commission to you unless you are an authorised rep of an AFSL

I looked at this yesterday.
The person concerned is on the ASIC Professional Register as AFS Rep Number 000343156 but they are not current the FAR.
There is also 2 x CAR on the Advisers website.
Correct me if any of that is wrong Tony.

That is correct, Carl. I am an AR for insurance-only GA. Many people seem to think that the GA is being provided when I'm authroised to provide PA when that's not the case.
It's also worth noting that every client file is audited to make sure the client has received GA only - there is a stringent process in place to monitor and review all files and the same breach reporting obligations apply.

Auditing personal advice involves checking a file to ensure all the client's relevant circumstances were collected and taken into account, and the recommendation given was fully documented.

Auditing general advice involves checking a file to make sure there is no evidence of collecting the client's relevant circumstances, and no evidence of any recommendation related to them. A personal advice file could be converted to a "compliant" general advice file simply by throwing most of it away or not recording it in the first place!

I wonder what kind of practice you're running if you think its a simple matter of adding or taking documents away to meet compliance requirements... Happy to educate you on the process of GA if you're ever interested in learning how compliance is managed.

To complicate it even further, DDO requires you to collect enough information about the client to ensure they are in the target market for the product and if not, you can't distribute to them.

Perhaps he runs his own license? About the only way he could 'compliantly' do this. But I suspect he's overstepping the line here.

Running your own licence doesn't provide any additional leeway in relation to the law.

It does if you ignore or don't understand the law!!

It might allow you to get away with ignoring the law for a little while, but it doesn't make it legally compliant.

As for understanding the law, the FASEA exam was supposed to ensure that. However it is possible to be a licensee Responsible Manager, without meeting any of the FASEA requirements. This needs to be tightened up.

self licensed advisers tend to more resourced and have better compliance support. Not to mention they become self licensed in that they believed in being more professional and they have "skin in the game". Contrast this with the larger licensee that has to cater for the lowest common denominator, when you've got 300 advisers and they'll be at least 10 that care or fully understand why an FSG needs to be provided.

that's a very general statement that they have more resourcing. Many are undercapitalised. In fact, most financial settlements occur ( yes excluding the FFNS debacle) from small licensee's. And yes large licensee lowest common denominator, but there's also added protection in that they are assuming the worst.

Absolute rubbish Yogi.

A common misconception of Advisers who view GA from a PA perspective when in fact they are 2 completely different services. I encourage you to read ASIC's guidance on GA (RG244) and reach out to me if you have any questions.

With respect to Smilevski, the Westpac case shows that the bank thought it was providing general advice safely, until it was proved in court that there were not. I am really not sure who is auditing the files of the adviser providing GA for insurance but they really, like urgently, need to get up to speed with the recent court and AFCA precedents because the quoting advice process described appears that it is very unlikely to be compliant!!!

In that case they contacted the clients and offered to rollover services. key was westpac engaged the clients first to offer the service rollover under the guise of general advice. what this fella is talking about is client walks in wants to get a quote on X and the adviser runs a couple of quotes as requested on X the client then picks the provider.

Works like real insurance the client fills out a form and what cover they want and how much and someone calls them with quotes and the client picks application completed.

doesn't matter client will still blame the adviser. and then call current affair who will say the client received advice.

Fair enough if the client is explicit enough about what "X" is. But most clients do not know exactly what insurance product, features and sum insured they require. Nor should they. Getting the right life & disability insurance is complex. It requires expert assistance. If a client is engaging an agent directly (rather than purchasing online) they will inevitably disclose something about their personal situation, and the agent will inevitably tailor the range of quotes they offer accordingly. The client will reasonably perceive they have been guided towards a solution applicable to their own personal circumstances, by a subject matter expert. From a legal point of view that is personal advice.

BTW for everyone saying "doesn't that happen in call centres all the time?", the answer is yes. Lots of financial services call centres are actually providing illegal personal advice. It is one of the many areas of consumer harm our regulators ignore, while they are focused on persecuting licensed advisers instead.

100% correct. The test is a reasonable person on the street, and they would say yep received personal tailored advice.

so in summary, you provided personal advice without any disclosures documents that is soa.

result from AFCA: pay the client damages, interest, and then referral to ASIC which will then ban you permanently so enjoy a lifetime ban.

that's how it works. pretty serious.

we need to breach Tony to ASIC per std 12

I agree with you. it may be very easy to prove that at least one objective of the client was considered and therefore it wasn't general advice but personal advice.

as we all know from court cases including the one you highlighted, that just because you think it's general advice doesn't mean it is so, it depends on what the client thinks or what a reasonable third party would think.

given, he may be giving personal advice which may constitute a breach or a potential for a significant breach do we need to report him to ASIC ? (std 12)

good question. do we need to breach him ? who is his licensee?

Chris Dastoor it might be useful if you could follow this up with another story. And see if it is a legally viable business model? Or as the comments elude to. That it's not possible.

We had Advisers under my old license that did this. They 'educate' the client on different methods of calculating their required cover levels, then show them quotes and let them pick which policies to go with (which obviously would always be the cheapest) and then help them process the applications. They receive the same commission as normal Advisers who go through the SOA process. It's ridiculous and just another reason why general advice should be gotten rid of. It's either personal or its information only.

sounds to me like a contrived way of giving personal advice. and breaches standard 1. then you breach std 2, then you breach standard 3, 4, 5, 6, 7, 9, 10.

Currently the only sustainable commercial model for general advice is subscription - debt management, money management, intrafund or leveraging general advice into home loan commissions

There is a misapprehension among many unlicensed advice providers that if they give a disclaimer such as "this is not financial advice" or "this is general advice only" then that relieves them of personal advice regulatory obligations.

If the provider makes money from it (via fees, commissions, referrals, subscriptions, or advertising) and the client reasonably PERCEIVES that the advice was tailored to their personal requirements, then it's personal advice. Disclaimers or positioning statements don't change this.

I'd put money on this not being a compliant process. Going through FoFA we had advisers that said "whaddya mean I can't send my client's quotes and let them choose the policy they want and the level of life cover they want and I just write it for them and collect the commission?" If it was that easy to do compliant advice that is in the client's best interest we'd all be doing it.

Are we all being so dismissive because we are coming at this from AR perspective? Would love to hear
ASIC view on this. Are we comparing apples with apples when referring back to the westpac case?

I think that's why a lot of the people commenting want Chris to do a follow up story and have ASIC provide their opinion. From how it reads, and for everyone who knows the rules (and ASIC drafted RG244 to provide some clarity) it really doesn't sound very compliant. It sounds like Tony has thumbed his nose at the legal requirements and because he hasn't been caught out, is convinced what he does is legitimate, which is why I'd really love to see a comment from ASIC or a follow up feature from Chris where he gets Tony and ASIC into a room together and they explore Tony's process and give their opinion on it. I can provide an educated guess that Tony wouldn't be in business much longer.

My thought would be, how can an online GA business operate (eg. Life Broker), yet if its GA from a person you are deeming it to be non-compliant?

What is standard number 1 does this type of action not breach that ?

sure does, see my post, 1 and then followed by virtually all others except 8, and 11.

we need to breach him or we fall foul of 12.

Just ring up ASIC and ask them. After you hear the "Sorry we do not interpret the law, please seek independent legal advice" you will be no better off. Personally it seems impossible to enforce a law you can't interpret But no one seems to hold ASIC to account for saying one thing and doing the opposite!

Agree - if only they were like the ATO and did tax determinations for some attempt to support clarity and confidence

This is the chestnut that still needs to be cracked wide open…how can good quality GA and PA be delivered confidently to meet the needs of clients sustainably. It’s a hot mess of Product v Strategic, GA v PA and licensing / unregulated.

If you DO NOT recommend product but you do help a client understand their current situation and deliver value to help them get themselves clear on what options are available, how they could structure cash flow / education and they take action - what is it?? Good quality GA and coaching or strategic PA?

Let’s get confidence around advice definitions if clarity is to ever come…the need for high end quality PA and quality non product GA at scale more than ever…

tony, don't you need to be a current adviser on FAR ? shows you as ceased.

No, you do not. You need to be a current Authorised Representative.

To all of the Advisers commenting with their PA hats on; You're right, general advice DOES NOT work if you also provide clients with personal advice - Oil and water. If you tried to give your clients GA you would be walking a VERY tight rope.
The important thing to understand is that GENERAL ADVICE IS NOT A REPLACEMENT FOR PERSONAL ADVICE - Once we're able to come to a consensus on this, the road ahead is much easier, both for clients and Advisers.
GA is there to help people purchase products only available through Brokers/Advisers whereas PA is there to provide people with advice on these products and the strategies around them.

If a client wants to buy a specific amount of insurance or DOES NOT want advice, what do you do? Do you take them through your advice process anyway, just to come up with their requested amount of cover? What if the commission on a clients policy was too low to cover your costs? Do you turn them away and tell them to buy it from a faceless call centre?
Why are you not referring these clients to someone doing GA, wouldn't that be in the best interest of the client?

I welcome anyone with questions to contact me directly. I am a big believer in GA as a way to get clients into the FP and am always open about how I operate and how I can help Advisers & their clients.

essentially yes, everyone has to go through the full advice process as we cannot just execute the client's instructions. we do take orders, that job is for lowly qualified accountants.

no, I charge the full advice fee which is a flat fee and I don't care about the commission earned on the product.

And if they don't want to go through the process and/or pay your fee? In the same way that you have a relationship with an Accountant, why would you not have one with a GA for insurance?

Because the accountant can give the client tax advice tailored to their personal circumstances. A GA insurance agent can't give insurance advice tailored to the client's personal circumstances.

I can see some potential for it if I have already given the client strategic personal advice about the product types and features and sums insured, and I'm referring to the GA agent for product implementation only. But to do that I'd have to charge the client a fee for my advice, and they would also be charged a commission by the GA agent.

Then again perhaps that is your intention Tony? Are you trying to get referrals from advisers who give strategy only insurance advice?

Yes, but an insurance-only GA representative can provide clients (who do not want strategy advice) with product.
As a Financial Planner, you would be in breach of the Code if you were only providing strategy advice and referring out the product sale, that's a clear attempt at circumvention.

It may be worth highlighting that I am not a Financial Adviser. I know that, the clients know that and ASIC knows that. The only people that don't seem to realise at this point are Financial Advisers.

GA as an insurance-only AR and GA from a Financial Adviser who normally provides the client with PA are two very different scenarios. You don't go online to buy a mortgage and expect to get PA in the same way you don't go to a Financial Adviser and expect to get GA.
As an GA insurance-only AR I'm there to provide GA only and to provide clients with quotes based on their selected types and amounts of cover. If clients don't know what they want or need advice, they are referred to a Financial Planner.

Hope that helps.

hi Tony,

I don't think you understand. if the client wants to get advice from me, they have to get full comprehensive personal advice. if they do not they can contact melissa caddick. there are lots of her types around.

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