The Productivity Commission (PC) has backed calls to limit the use of the term ‘advice’ to professional financial adviser and for a renaming of ‘general advice’.
The PC’s draft report on Competition in the Australian Financial System, released today has urged the measure to “ensure consumers are able to clearly distinguish between general promotional effort related to products and actual personal advice”.
It said that use of the term ‘advice’ “should be limited to effort that is undertaken on a client’s behalf by a professional adviser”.
“Currently, the terminology of advice requires consumers to intuitively understand that general advice is like marketing; and personal advice is actually tailored to their situation and carries with it some protection against misuse,” the draft report said.
It said rebadging of existing ‘general advice’ products to implement this would involve some cost to the industry, but suggested that some documentation would be electronic and that most would be updated regularly and the marginal costs of the change would not be substantial.
“The important shift is to training in the use of this term (and the culture that accompanies it),” the draft report said.
The draft report has formally recommended that general advice, as defined in the Corporations Act 2001, is misleading and should be renamed.
“The Commission supports consumer testing of alternative terminology to ensure that misinterpretation and excessive reliance on this type of promotional information is minimised,” it said. “The term ‘advice’ should only be used in association with ‘personal advice’ that takes into consideration personal circumstances.”