Mixed views on decoupling ‘personal advice’ from ‘financial service’

There are mixed views on the proposed decoupling of ‘personal advice’ from the definition of ‘financial service’, according to submissions presented in a Australian Law Reform Commission’s (ALRC) Financial Services Legislation Inquiry background paper.

ALRC had proposed the amendment of Section 766A(1) of the Corporations Act 2001 to remove the term ‘financial product advice’ from the definition of ‘financial service’, substituting it with ‘general advice’.

Amongst those in support of the proposed reform were the Accounting Professional & Ethical Standards Board, arguing the proposal “will enhance and clarify the regulatory distinction between general advice and personal advice, the latter which is subject to more extensive requirements”.

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Kit Legal also indicated their support for Proposal A14, on the basis that it “should be very clear which obligations apply to the relevant service provided”.

They agreed that it was worth considering “aggregating aspects of regulation that are specific to personal advice”, and considered that it was “currently not clear on the face of Chapter 7 that certain aspects are only applicable to personal, not general, advice”.

In expressing support for the proposed reforms, some submissions also called for substantive reconsideration of the existing connection between financial advice and ‘financial products’ in the regulatory framework.

The ALRC noted in Interim Report A that the proposed reforms could facilitate, though would not necessitate, more substantive changes to the regulation of financial advice.

By contrast, the Insurance Council of Australia said the proposal could “have the potential to increase, rather than reduce, complexity in relation to the operation of the advice provisions in the Corporations Act”.

University of New South Wales (UNSW) associate professor, Marina Nehme, agreed the proposed reforms might result in greater confusion, and suggested that the relative obligations of financial service providers when providing personal advice versus general advice could instead be clarified through the inclusion of a table setting out the different obligations in the statute.

Both UNSW professor, Pamela Hanrahan, and the Law Council of Australia queried whether ‘general advice’ should continue to be regulated as a financial service.

In their view, general advice was a ‘business communication’ that should therefore fall under consumer laws, whereas regulating it as a financial service created “an expectation that an agency, such as the Australian Securities and Investments Commission, is overseeing it for quality”.

MinterEllison also noted concerns with the proposal, because if only ‘general advice’ was “included in the definition of financial service, then that would suggest that general advice requires a licence but personal advice does not”.

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What a complete and utter mess this industry has become.
Over complicated, over regulated, over analysed, over manipulated, over scrutinised and over conflicted.
An utter mess and a disgrace.

Right with you there ''Experienced''. Time to start with a blank piece of paper from which those with the right intent will prosper. Too late for me though !

Agree 100%.
Always another know it all academic who has never sat in front of a client to tell us how it should be. So over it.

Surely the starting point in clearing up the whole general advice vs personal advice mess is to get rid of these subcategories altogether and call it either "advice" or "information". Advice involves a recommendation or opinion. Information does not.

Most consumers can readily discern between information and advice. But they cannot discern between different subcategories of advice.

No advisers will have the time to submit and analyse in detail, only the academics and lawyers getting paid by various interest groups

Yeah... that clarifies it for me!!!!!

Who pays for this stuff?????

How can they be still going around in circles about general advice, at least 5 and maybe 10 years after government agreed that the name had to be changed.
It is not advice, full stop! Delete the name general advice completely, don't even think about calling it product advice and make it very clear for consumers that this is product information. That's all it has ever been and all it ever will be. Othewise they are crossing the line into personal advice.
The fact that this is even being discussed indicates that there will be no useful changes will come from the LRC review. It's always bloody academics that seem to know diddly about anything, that are put in charge of 'fixing' things.
God help us for another 10 years.

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