Advisers need to ensure their clients understand the difference between personal and general advice or risk a complaint to the Australian Financial Complaints Authority.
In a determination from the Australian Financial Complaints Authority (AFCA) during the second quarter of FY22, the organisation detailed a case where a complainant had sought advice to increase life insurance within superannuation from $200,000 to $1 million. The adviser was then accused of failing to implement the recommendations after the complainant’s partner died and he received a different amount to what he had expected.
However, the adviser argued that no advice or instruction had been given to arrange this higher level of insurance.
AFCA found the adviser had stated the complainant should increase their life insurance but requested more information from the clients to “take it further”.
The email stated “You both should also have at least $1M life cover each, which is best done via super” but the firm argued this was indicating the adviser’s view that all young families should have $1 million insurance rather than personal advice to the client.
“In the overall context, I do not accept this constituted personal advice as it clearly did not take into account their individual circumstances, including how much insurance they already had,” the AFCA adjudicator said.
“No instruction was given to increase the insurance. The complainant’s wife provided the further information requested on 10 February 2017. In September 2017, the financial adviser had the complainant’s wife sign an authority to act on her accounts. However, the super fund rejected this. It appears no further action was taken, and the complainant’s wife became sick shortly after this.”
As to what constituted personal advice, AFCA recommended the adviser must have made a recommendation taking into account the complainant’s circumstances and considered the overall circumstances of the recommendation and the context in which it was made in, to make such an assessment.
The adviser concerned email also contained no detail of any specific product or cost and no product recommendations were made which meant there was insufficient detail for it to be considered as personal advice, AFCA said.
During the 2020/21 financial year, only 1.8% of all AFCA complaints related to advice or were made about a financial firm which identified as an advice provider, a total of 1,238 complaints.
