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.”
Comments
I agree it is very misleading. It is either information or advice and it should be called called 'General Information' or just 'Information' unless it is Advice.
I still don't think even the PC has this right. General advice doesn't have to be about a product, therefore it is not 'promotional' as they've stated. I agree Leanne, General Information is better. General information upon which you shouldn't rely if you feel you don't understand and will therefore require Personal Advice.
Yep and let's ensure that this applies to ISA rep's & direct insurance telemarketers as well...
Lets just call it NFA
ASIC.... Its not the terminology that is the problem. Its the fact that sales people with 2 hours worth of training can "recommend" under "general advice" or "general information" that a client take up a new insurance policy which can have massive implications on their financial wellbeing. These sales reps are not long term industry participants and its dont care about their license to provide "general information". They just want to make a sale so they can hit their targets and get bonuses. They dont have to care about the client or act in the client's best interest. These slaes reps are often students or travellers who treat the sales job as a short term occupation.
The only way to clean up this industry is to apply the same set of rules to the direct scammers as applies currently to advisers, particularly Best Interests Duty.
Direct Insurance sales should in reality be banned.
Well said Graham or they should have to at least say and put in writing that his will most likely cost you significantly more in the long term than if you went and sort proper advice
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