Risk advice only suited for general advice

General advice licenses are best suited for life/risk advisers and do not work for investment or superannuation related advisers as that requires too much personal information, according to an advisory group.

General advice licenses could become an attractive option for advisers who did not want to or were struggling to pass the Financial Adviser Standards and Ethics Authority (FASEA) exam, or if they did not want to complete the education requirements.

Australian Advisory principal, Mark Dorling, said general advice licenses only worked for risk advice.

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“General advice is only risk, it’s impossible to do superannuation under general advice because you need too much personal information,” Dorling said.

“We do just risk: life, income protection, critical illness, trauma, TPD [total and permanent disability], and business expense.

“[With investment] you need too much information, you need to give them a risk profile, what asset allocation they need, so you’re just going into too much personal information and you have to ascertain their tolerance to risk which you can’t do with general advice.”

In the context of insurance, general advice allowed advisers to inform clients on the different levels of advice.

General advice meant not taking into consideration personal circumstances or making a recommendation – it was up to the client to make their own informed decision.

There was still a requirement to do a fact find, keep file notes and a duty to disclose it was general advice, but no statements of advice (SoAs) were required.

“This is where it is ideal for those old risk writers that have been forced out of the industry at the moment,” Dorling said.

If a client did require personal advice, they could still be referred to a full advice adviser.

“We refer it to someone inhouse that does personal advice… the full advice adviser would do a full SoA and treat it as a personal advice client,” Dorling said.

RG 244 still relevant

Regulatory Guide 244 (RG 244) from the Australian Securities and Investments Commission (ASIC) outlined what was permitted within general advice.

A spokesperson from ASIC said: “RG 244 sets out ASIC guidance on giving factual information, general advice and personal advice (including the differences between them) and the legislative framework relating to what constitutes general advice and personal advice under the Corporations Act – this has not changed since it was last updated”.

RG 244 currently stated: “As a general rule, if you carry on a business in Australia of giving general advice to clients that is a financial service, you must hold an AFS [Australian financial services] licence with an authorisation to give general advice, or be an authorised representative of such a licensee, unless an exemption applies.

“If you are licensed to give general advice, you must warn the client that:

  1. The advice has been prepared without taking into account their objectives, financial situation or needs;
  2. The client should, therefore, consider the appropriateness of the advice, in light of their own objectives, financial situation or needs, before acting on the advice; and
  3. If the advice relates to the acquisition, or possible acquisition, of a particular financial product, the client should obtain a product disclosure statement (PDS) (if required) relating to the product and consider the PDS before making any decision about whether to acquire the product.”



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To suggest that insurance only requires general advice would indicate a total lack of knowledge, expertise and professionalism on your behalf and as a specialist risk adviser for over 40 years, I hope ASIC have a good look at you and your licence because there is no question that most people need quality personal advice for their insurance needs. Giving general advice only is a blight on our industry.

I would agree that insurance delivered under personal advice is ideal, but the reality is that it is not sustainable to provide for most advisers and increasingly out of reach for the average Australian.

KPMG recently found the average cost to provide financial advice exceeds the price paid by 30% as detailed in the recent FSC white paper, highlighting the reality, that for most advice provided, it's a loss leader.

Most advisers report having to turn away clients below a certain spend. Where should these clients go to get access to insurance? "personal advice" that isn't provided is the real driver of general advice here.

If you cannot provide advice sustainably then get out of the space and leave it to the professionals like us that can and do provide it sustainably!

You'll be aware that hundreds of advisers are leaving every week, week-on-week. You'll also be aware that many advisers who have met education requirements, and have passed FASEA contribute towards Adviser Ratings’ recent prediction of an additional 2000 advisers being removed from the register on the 31st December.

Kudos to you for being able to operate as an anomaly, but even as sustainable as your business might be, and as sustainable as many others may develop to be. It is unlikely that everyone who wants or needs insurance can be serviced under a personal advice model.

Reduced advisers, and a continued need for insurance will continue to drive the demand for a simplified advice model, irrespective of what it is called. Licenses that can demonstrate how to clearly differentiate between the advice models, and who have robust delivery and monitoring frameworks will ultimately support what is undeniably a growth space.

General advice shouldn't be a replacement for personal advice but is and has remained an alternative for clients who don't require recommendations.

I don't think you get it and or letting your cognitive biases cloud your logic.

there is room for all sorts of advice models: full comprehensive personal advice, limited comprehensive personal advice, scoped comprehensive personal advice. digital comprehensive personal advice, digital limited comprehensive personal advice, digital scoped comprehensive personal advice (it's a joke)

the current legal framework with the fasea code overlay ( i suggest you do a very deep dive into the code) doesn't allow for anything other than comprehensive personal financial advice. other professionals (i am also a qualified accountant) can limit the scope of the engagement (even based on the cost), we cannot limit the advice based on cost or other things, in fact, in the last two engagements, I have had to broaden the scope of the advice (and the cost to the client) to comply with the intent and the spirit of the COE.

I do a fair bit of litigation support work for lawyers, and let me tell you if you are providing limited scope advice you will have a truck driven through your advice.

now, if you want a short life in the industry and don't mind being banned for 3, 5, or a lifetime & have no personal assets in your name (and or have disbursement them in the last 5 years) and don't mind doing a career change and having your reputation ruined go for it.

for the rest of us, who have spent a lifetime earning multiple degrees and building significant businesses we will stay clear.

oh, but for the consumer, well they can seek redress through contacting their local MP. the unintended -and very bad consequences on the consumer - of poorly thought out governmental policies is not the responsibility of the financial planner.

so don't you dare try and pin that on me too.

Thanks Bobby,

Well aware of the FASEA code, and more specifically when it applies, and who it applies to.

General Advice too is covered under a "current legal framework", a framework that is used by the superannuation and direct insurance industry & increasing number of groups that offer retail products under a general model (including some insurer owned groups).

To assume that a general advice framework attracts only the uneducated and that somehow the regulatory framework doesn't afford the same protections when executed correctly, is misguided.

I couldn't agree more.

I don't think you understand what general advice is. There is no advice given at any stage.
The client is telling you what insurance they want and with which product provider, all you are doing is submitting the application on their behalf.
As you call yourself a professional, you need to learn to look into things in more detail before making such stupid comments, as you clients are acting on those comments.

these clients should call either Danielle press or joe longo (he likes to play the bongo), or peter kell he now works for Westpac, or best of all Jane Hume.

mark doesn't have any quals, a diploma of something TMA.

we need to breach him per std 12. there is a significant likelihood of a potentially significant breach. or we fall foul of std 12 ourselves.

another breach report to ASIC, already sent them 2 last week.

ASIC is probably looking at your report and thinking of doing an audit on you !

General Advice is an option for those clients that don't need to be told what they need and don't need. It is basically a policy comparison tool done on behalf of the client to find them the best deal possible based on what THEY want. For other clients who require our help as a profession, they need to be dealt with under full advice approach.

The a, b ,c points from RG244 just serve to highlight how confusing general advice is. under General Advice you are educating the client so they can make their own decision, you are not making a recommendation. However, the legislation says the "The advice has been prepared without taking into account their objectives, financial situation or needs" and "The client should, therefore, consider the appropriateness of the advice" and "If the advice relates to the acquisition, or possible acquisition, of a particular financial product". You need to ensure the client is informed of these issues about the advice they are receiving, which isn't advice because you can't make a recommendation.

I guarantee you that every single client who receives 'general advice' would perceive that as receiving a recommendation.

It's a ridiculous grey area that needs to be removed frm the legislation. It's either advice (requiring an SOA) or it's information.

To say that when you give 'general advice' you don't make a 'recommendation' is incorrect. 'Advice' is: a recommendation or statement of opinion that is intended to influence a client in respect of a particular product. You then decide if you are going to give general advice or personal advice. You can make a 'recommendation' when you give general advice, eg, 'Mr Smith I recommend you take out enough life insurance to cover your debt and enough IP to cover 75% of your salary and you buy that insurance from ABC Insurance company'. This is general advice because you have not considered Mr Smith's personal circumstances, ie, his debt or his salary and is a recoginised form of general advice.

How can you recommend a product if you don't know their circumstances or can't take into account their circumstances? what are you basing your recommendation on? are you just blindly pointing them in the direction of the cheapest product? How can you meet your FASEA COE obligations to the client if you are recommending a product without a basis for that or knowing what their personal circumstances are.

I understand it is possible to do this, I sat through a PD day where a general advice Adviser explained his process to us. To me it is too confusing for the clients and should be gotten rid of.

FASEA and Code of Ethics only apply to the provision of 'personal advice'. The Guide to the Code states:
This guide is primarily directed to financial advisers (“you”). It will help you to understand your ethical obligations as established in the Code of Ethics if you are:
• A relevant provider
That is, if you are an individual who is:
• a financial services licensee;
• an authorised representative, an employee or a director of a financial services licensee; or
• an employee or director of a related body corporate of a financial services licensee;
and you are listed on ASIC’s Financial Adviser Register as authorised to provide personal
advice to retail clients, as the licensee or on behalf of the licensee, in relation to relevant
financial products.

No wonder advisers are failing the exam - they don't understand what obligations are applicable to them and what is not (as FASEA states each month in its report on the previous months exam results.)

read your own post. you are a relevant provider, if you are "an authorized representative" your post bullet point 3 from top-down.

to provide general advice you have to be an authorized representative

are you sure you passed the fasea exam, because I did quite easily in the first sitting

You need to be a relevant provider as defined above AND you need to be "listed on ASIC’s Financial Adviser Register as authorised to provide personal advice to retail clients, as the licensee or on behalf of the licensee, in relation to relevant financial products."

Being an authorised representative (listed on the professionals register) is not necessarily the same as being listed on ASIC's Financial Advisers Register.

Timmy - did you pass the FASEA exam? Do you know what a 'relevant provider' is? In case you don't, it is a person who provides PERSONAL advice to a RETAIL client. The bullet points then detail who in the financial planning industry is a relevant provider, that is, a person who provides PERSONAL advice to a RETAIL client. If you are one of the categories listed and you who provides PERSONAL advice to a RETAIL client, you are a relevant provider. It isn't hard.

100% spot on. remember the ultimate test of whether someone received general advice or personal advice rests with AFCA, they are all customer service people with very little (if any) understanding of the law, they are not a law court, they do not follow rules of evidence, they do not need to follow the law. they are a consumer complaint agency funded by us. worst of all they are free to the consumer.

if it sounded like personal advice, and a reasonable person on the street thinks it is personal advice. it's personal advice. bad luck.

I never use the term general advice. I always say general information AND because "I don't know your personal situation because I haven't considered any of it. so you need to assess this information for yourself as to whether this is appropriate for you and your personal circumstances. if you don't know and you'd like me to do give you advice that considers your relevant personal circumstances, needs, goals, and objectives, I am happy to do that for you and the "personal" advice will be provided in the legal form required, called the Statement of Advice, the cost is $4,400 plus GST. currently, it takes me 30 days to produce"

then I reference my general information emails with lots of hyperlinks to RBA says this on interest rates, warren buffet says this on diversification. joe blogs with the tattoo and half-shaved head (this resonates with a lot of millennials types) says this.

even then it's not foolproof because it could "reasonably be regarded as being intended to have such an influence (s766B (1)(b)) and "personal advice".

so ultimately the unknowledgeable customer service person at AFCA decides my fate. Good luck trying to prove that you didn't give personal advice. remember I can provide all the evidence and it won't matter because it's what the consumer feels they received or told to the "effect of". no evidence, no law, no rational nothing applies.

you won't win, so the best advice I can give you is to be very very selective in taking on new clients and let go of any client who doesn't sign and return an FDS or opt-in within a week (they aren't engaged). make the onboarding process very difficult, it should be very difficult for a client to become a client of yours or mine (then it should be very good thereafter). ask them to see two or three other planners and interview them before coming back to you. trust me you will weed out the ones that are looking for cheap and those that aren't really engaged or committed very quickly.

be careful out there. everyone is out to blame someone. when interest rates increase (because inflation is not transitory) shit will hit the fan. they need someone to blame. don't let it be you.

Agree with everything you say. I was just pointing out that you can make a recommendation when giving general advice. You will never be able to prove you ONLY gave general advice to client when that advice was given in a one on one meeting with a client. Don't care what your file notes say, if the client says 'he told me to get $500K of life insurance' the adviser has to prove they did not consider their personal circumstances in making that recommendation - on what basis did they 'recommend $500K'

How do you calculate how much insurance is appropriate without knowing the client, debt, family needs, etc etc - surely that is personal advice - I sort of can't believe I'm reading this stuff.

Same way they do it at Industry Super - it's always more than you have now. Just sell more product.

1. A calculation should not be made for a client under a general advice framework, this should be client directed & if it cannot be, it should be referred for personal advice. An adviser who toggles between general and personal advice is very risky.

2. Appropriateness of coverage and client needs should not be evaluated under a general advice framework, that is in fact a key indicator of personal advice.

I’m confused, so you can give Life & TPD so called general advice without taking into account the customers existing Life & TPD ?
And how can you give Life & TPD general advice without assessing if it should be inside their super fund or outside ?
Seems like a crap, legalistic attempted work around to obviously reduce compliance but obviously provide a rubbish advise service.
The name “General Advice” is the real problem here ASIC & Pollies. It screws the whole conversation,
General Advice = Product Information
The fact our moronic Canberra bubble bureaucratic clowns can’t or won’t understand this is the major concern.

How do you think Real Insurance operate? .... or Choosi? No advice given, sales made. In the client's best interest? Doubtful. :P

I’m aware of an operation on the Gold Coast doing this - it makes me shudder. The only way general advice for risk works is if it is direct from the insurer, I.e. one product only that they can sell. If not, how do you say oh well TAL was better than AIA so here is a TAL quote - you’re straight into personal advice the second you do this. Dangerous.

Mark Dorling’s commentary is of great concern.
It concerns me that there are individuals in this position that dumb down the risk analysis
process and appear to be advocating that levels and types of insurance cover can be put forward to a client as general advice when the only possible method of reaching those conclusions is a full analysis of personal data meaning the advice or information provided is therefore personal.
Unless a client comes to a general advice adviser and requests “ Tell me about Income Protection and Trauma Insurance…how it works, what things do I have to consider, how does the claim process operate, what types of definitions are there etc” …it is personal advice.
If a client then asks should I have a 30, 60 or 90 day waiting period for Income Protection cover, the only answer that can be provided is based on personal circumstances and position….therefore it is personal advice.
Mark Dorling’s comments appear confused and of risk.

I agree there is a space for client directed decisions.

A well designed and implemented framework can support a general model (scripted calls, automation, call recording, independent auditing etc).

I struggle to understand how collecting a fact find and providing general advice works, and how this could be defended.

I also struggle to understand how licenses that offer their authorised representatives the ability to toggle between personal and general advice works or how this could be defended.

Agree with this. You cant do a fact find, ie collect personal information so the client knows you have enquired about relevant circumstances, then help a client lodge an application for a particular product and take commission for that service and argue the client didn't reasonably expect you were giving personal advice. AFCA wont buy that for a second. If your not licensed how do you lodge product anyway unlicensed? or are we charging a fee for unlicensed general advice here? Just doesn't add up once you collect the clients individual information by a fact find you are in personal advice space like it or not....

AFCA have more complaints about insurance than anything else!!! Seriously, if a client perceives that they have been provided with personalised advice then no FP can hide behind the GA warning and/or pretend that RG244 will somehow protect them. I for one will absolutely have no hesitation with invoking std.12 of FASEA if I come across any clients that feel they were duped by a FP who has provided insurance advice to them under GA provisions.

If you have lodged a complain against an insurance company under in group insurance, this comes under the super fund not the insurance company so they normally are not correctly reporting the numbers in the news in most cases.

https://data.afca.org.au/at-a-glance

Also they talk in the new about advised policies payout figures vs group this assumes that advisers don't recommend group cover either.

Aren't most of the AFCA claims are to do with the insurer not paying out (client doesn't meet claim definitions, slow claim payments, non-disclosure) ? Not sure if insurance advice gets caught as much as you think.

This article seems to be full of contradictions. I am not sure how you can do a full fact find and keep file notes as indicated by Mark Dorling in paragraph 9, and then somehow magically flick that switch in your mind that allows you to give General advice that doesn't take into consideration personal circumstances or make a recommendations. Seems like a high risk strategy to avoid writing an SoA.

This that can or should apparently be able to be provided without being under personal advice rules.

Risk advice (General advice risk advisers)
Super contributions (Accountants)
Super investments (Super fund call centre)
TTR (Accountants/Super funds)
Super rollovers (Super funds)

Makes you wonder why licensed advisers need to go the pain of compliance when it's apparently not so difficult or important.

Mr Dorling RESIGN IMMEDIATELY!

And SURRENDER your LICENSE. If you have one, that is

I have never heard such an un-informed comment EVER.

These kind of commentry brings entire financial service into disrepute, irrespective of whether you product issuer or distributor, you provide personal or general advice.

General advice has its place, and yes it is very affordable way for individual to get insurance advice, but it can also be used in many other situations, e.g. investment, superannuation retirement advice.
Under general advice your opinion is intended to influence a person in making a decision in relation to a financial product or class of product. Its diffierent thing that it doesn't consider someone's personal circumstances when providing such opinion.
Under GA you ought to warn someone what you haven't considered. When you are providing GA, even if you may not intend to you are entering into fiduciary relationship as described under common law. And as fiduciary you have to take reasonable care to warn someone of potential risks.
Additionally under statuary DDO rules u need to take reasonable steps to ensure your conduct results in distribution of product to client in target market. There is a carve out that enables you to ask personal question to confirm whether someone is in target market and it is not considered perosonal advice just because you have asked question to confirm whether someone is in target and relayed the outcome of that determination. With this new carve out i see GA can now be offered in various other type of financial product besides the one i have described already

It is a real pity that our industry still have individual in power and influence who don't understand the subject matter but act as mouthpiece rambling incoherent and factually incorrect idealogy bringing the entire industry to disrepute.
That is why i FIRMLY beleive everyone who provides financial product advice on tier1 product needs to pass fasea exam. Irrespective of whether they provide personal or general advice

There is no doubt that there is a time and place for general advice. But to call yourself General advice and undermine what was said in the article shows a lack of ability to accept anyone else's opinion other than your own.

What we lack as a profession is leaders who understand the day to day operations of a financial adviser, and the different level of assistance that clients need.

To not use different service models will only limit our ability to support the Australian community and deprive a large number of clients access to insurance.

I think Marks article delivers a lot of good points, and there is a place for both Personal advice as well as General advice to make sure that we can have as many Australians as possible with access to insurance.

Risk writers out there, should not have to complete a full SOA and do a wholistic approach to clients who only want insurance and know the level of cover the want. That is a serious issue as advisers having to turn clients away because they don't want to do it.

Jason, I think the challenge will be you need to either 'do' general advice or personal advice. I am terribly unsure of how you could offer general advice to some clients and personal advice to others. Not saying it can't be done, but in the absence of the ability to go to ASIC and get a 'binding ruling' like one can from the ATO on a tax question, the risk may outweigh the reward.

I think personal advice could be provided in a similar way to general advice by incorporating some technology and doing away with a statement of advice.

Meet client & gather financial info & pre-assess with insurers if needed, talk to client about how they typically calculate sums insured and then the adviser works through calculation with the client to determine their sums insured on the advisers software, adviser also pulls up product comparison from their software so client can see the differences in ratings/features between products and ratings against their existing products. Adviser makes verbal recommendation (or succinct letter of advice?) outlining the sums insured, structure and product recommended they think is best. Client decides whether they wish to proceed/alter the recommendation etc.

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