Consumers confusing general and personal advice

Many consumers confuse general and personal advice, with 47 per cent of Australians surveyed by the Australian Securities and Investments Commission (ASIC) incorrectly identifying general advice and nearly 40 per cent thinking general advice needed to take their personal circumstances into account.

This latter statistic was in spite of participants being provided with a general advice warning, with the regulator worrying that these results exposed consumers to greater risk of poor financial decisions.

The Financial Advice: Mind the Gap report also found that nearly 40 per cent of those surveyed didn’t realise that advisers weren’t legally required to act in their clients’ best interests when giving general advice.

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ASIC deputy chair, Karen Chester, said that these findings were pertinent given the current Government focus on adopting the recommendations of various inquiries into financial advice. Both the Murray Financial System Inquiry and the Productivity Commission, for example, made recommendations regarding the term ‘general advice’ as they were concerned that it was likely to lead to false expectations from consumers on both the value of and protections of such advice.

“This consumer research is timely. It comes as the Government is considering policy recommendations on financial advice from the Productivity Commission’s twin reports on Australia’s financial and superannuation systems,” Chester said.

“And at a time when the financial system itself undergoes much change, following the intense scrutiny of the Financial Services Royal Commission, including considering new financial advice and distribution business models.”




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looks like the amount spent on financial literacy in Australia has resulted in a F on the report card. Does not look like the public system is contributing to much financial literacy nor education. As they say, you only get what you pay for.

This highlights why we should have a 3rd category: product sale.

General advice is a very useful tool for advisers because it provides a mechanism to be helpful without having to engage a client for the full process. This suits clients who might not be able to afford personal advice or those not ready for it and it allows us to do some good by helping people with the basics.

However the overwhelming volume of general advice is not advice at all, it's a product sale.

So here is my pitch: a new catagory with a new disclosure.

Product sale: information provided to you does not take into account your personal circumstances and the objective of this communication is to sell you a product. The information provided may include strategies or explainations of the product that assist you to make use of the products features or benefits. This information may apply to other products or services. The representative has no obligation to look after your interests and will be paid by the product provider.

So 47% of all rollovers to an industry fund has been considered misleading as the customer believed that they had considered their situation. Hmmm, maybe the biggest scandal yet?

General advice and personal advice is so similar that most people would not be able to tell the difference. Ive said it before but General Advice in person at point of sale needs to be banned. It is used by sales reps at superfunds/insurance companies to get out of the best interests duty and provide unregulated advice with no client protections. GA should be limited to print and after point of sale only. The sales reps with 2 hours training are able to do pretty much what advisers with 20 years experience do (just without any client protections), and ASIC thinks there is no need for them to be forced to act in clients best interests. What a joke.

That being said. After years of doing things properly under full advice i have started doing everything under general advice. The banks/super funds and insurers are have been doing it and getting away with it so why shouldnt i be able to do the same. The outcome for the client is exactly the same but i dont have to waste my time with the compliance rubbish.

Oh, and i also dont have to bother with this FASEA cash grab by the universities.

Come on advisers. Join me and do what the big players have been doing. You will have 35 extra hours a week to help clients with their finances, or better yet go to the beach or play with your kids.

Industry funds will not allow the banning of General Advice as they need this mechanism to dodge the pesky best interest duties so more rollovers can flow in cost effectively.

To consumers all advice is personal - doesnt matter where or how it is delivered all consumers relate whatever is communicated to their personal situation.
Many of the ongoing deep issues in advice relate to ASICs attempt to stretch and interpret what was laid down at the turn of the century in the FSR Act which was a response to the issues that emerged in the 1990s. FOFA + FASEA + Hayne laid down the beginnings of advice as a professional services business. However the whole issue of how non advised help with personal finance or advice for everyone remains an open issue. Needs a legislative response cause ASIC cant contort the FSR ACT - advice is an investment product recommendation to a useful end for not-advised help.

Here's a very simple solution - don't call it general 'advice' - call it general info or factual info. Anytime you include the word advice then of course consumers are going to assume that the advice given to them has taken their personal circumstances into consideration. Since the terms Financial Adviser and Financial Planner have already been enshrined in law, why not enshrine the terms 'financial advice' or 'personal advice'? Consumers will then be able to discern that only financial/personal advice that has been provided by a licensed and qualified FA/FP has taken into consideration their particular circumstances and is in their best interest. If the government legislates to ban the banks and super funds from using the term general advice that would go a long way towards enabling consumers to be able to differentiate between general info and financial advice.

The problem there, Simples, is that if a consumer goes to any other professional - accountants, doctors, lawyers etc - and gets general info or factual info, for whatever reason they call it advice. It doesn't help that these other professionals also call it "advice" and charge accordingly. It's no wonder they're confused. Maybe that's what financial advisers need to do?

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