Consumers fail to understand when they are receiving personal advice
Consumers who receive information about financial products at conferences or seminars often do not realise that does not constitute personal financial advice, according to the Financial Planning Association of Australia (FPA).
Appearing before the Senate Economics Committee to discuss the collapse of the Sterling Income Trust, FPA head of policy, strategy and innovation, Ben Marshan, said the way these types of products were sold made it seem to consumers that “their dreams were coming true”.
Sterling Income Trust, run by Sterling Group, was sold to investors as a “lease for life” as their long-term tenancy was linked to investment performance. Investors were told the returns from their initial lump sum would be sufficient to cover the rent on the lease and no other payments would be required towards rent. When it later collapsed, people were unable to pay their rent.
Marshan said: “These type of schemes are targeted through seminars and radio advertising, they are very complicated to understand because they’ve got complicated business structures behind them.
“But the information that consumers are provided at the seminars make them sound like all their dreams are coming true.
“There’s not enough requirements for products to disclose the complexity and the risks when they’re in these seminars.”
He said consumers often mistakenly believed they were receiving advice at these types of events and that product providers failed to correct them.
“Research shows when consumers go to a seminar or attempt to speak to someone directly about a financial product, they think they’re getting personal advice and that the advice has considered whether the product is appropriate for them,” Marshan said.
“From the other side, the product providers know they are not providing personal advice and there is none of the personal advice protection there. But they don’t make that apparent to the consumer because it is not in their interest to send someone off to a financial planner.
“Consumers do not understand when they are and when they aren’t getting professional advice and that advice often isn’t in their best interest.”
AUTHOR
Laura Dew
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