Proximity of general advice warnings to retail clients is vital in determining if a financial adviser is compliant in advising clients, as is the effectiveness of the warning, The Fold Legal warned.
In a blog, law graduate, Marcus Wong, flagged to advisers that warnings concealed within a large amount of text or fine print on a website would not be compliant.
“If you believe a simple warning at the bottom of a website is sufficient, think again,” Wong wrote.
Advisers should place general advice warnings close to the advice itself on documents and must be given to the client at the same time and in the same method as the advice in order to be compliant, The Fold Legal warned.
Furthermore, advisers were not permitted to direct readers to another webpage or source of information to access the general advice warning.
General advice warnings must traverse three points: the client’s objectives, financial situation, or needs have not been taken into account: the client should consider the appropriateness of the advice before proceeding, and, in cases where the information related to specific products, clients should refer to the product disclosure statement before proceeding to buy it.
Wong said that a comprehensive and compliant warning would usually contain language of the law, but said advisers should use consumer-friendly language that still covered the three points.
When providing general advice warnings orally, either by phone or face-to-face, advisers would only need to cover two points: the advice was general, and may not be appropriate for the client.
“This reduces the regulatory burden on advisers and helps retail clients to easily understand the warning,” Wong said.
“However, it is good practice to be upfront about fact that you are only providing general advice, so the client understands from the get-go.”
