SIAA suggests ‘strategic advice’ definition

The Stockbrokers and Investments Advisers Association (SIAA) has defended the title of ‘general advice’ and refuted suggestions it should be changed to ‘information’.

In its submission to the Quality of Advice review, SIAA said re-labelling general advice as ‘information’ failed to take into account the fact that it must contain a recommendation or opinion and that general advice was an important part of the advice spectrum.

“Further clarity in the law is needed on the line between both personal and general advice on the one hand and what constitutes factual information on the other.”

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This was particularly relevant for SIAA’s members as it would affect their production of research reports on listed securities, which were currently classed as general advice, and there were concerns investors would dismiss ‘information’.

“Investors are unlikely to ascribe value to material that is defined as ‘information’ as they would consider that they can obtain that themselves on the internet.

“There will be a cohort of consumers that either don’t want or can’t afford personal advice. However, they may wish to access general advice. There will also be a cohort of consumers who are happy to receive general advice or no advice for a certain period of time and then ‘jump in’ and receive episodic, personal advice when it suits them.”

Instead, SIAA suggested there could be a category called ‘strategic advice’ which would be separate from financial product advice to accommodate the reduced risk of consumer detriment associated with this type of advice.

This would include advice on areas such as budgeting, home ownership or the Centrelink pension or advice to small businesses that included financial strategic advice.

The delineation between the various terms would also help the industry to understand where to draw the line regarding ‘finfluencers’.

“Increasing the financial literacy of Australians is important, but those doing so on social media require clarity as to the line between both personal and general advice on the one hand (and why such advice requires licensing, qualifications in the case of personal advice and ongoing CPD) and factual information on the other.”

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All this proves is that some people in the industry are going around using personal advice under the guise of general advice.... if you are not giving advice you should not use the word and if you are not making a recommendation you should call it factual information.

It's even more concerning that many advisers on here don't know what general advice is. As the SIAA are pointing out, they are giving general advice that a stock is worth buying or not. It is advice because they are giving an opinion about whether the company is worth buying or not. It's not personal advice because they aren't telling a specific person to buy it after considering their personal circumstances. I'd say all research houses operate under this structure and it's not just factual information because it comes with an opinion.

If you tell someone a stock is a buy, shouldnt you also investigate the client's ability to purchase the shares? How can you tell someone to buy something , make brokerage, then wash your hands of any repercussions? You say they arent telling a specific person to buy, then how does that specific person find out about the stock? By direct communication to them. This is just hiding behind the general advice definition, which just isnt cricket. You either give someone advice or not. If you make someone aware of a stock then buy it for them, so you create the demand for it then make brokerage on the trade, its not the same as just product information, its a enducement to buy. Brokers want all the money from clients, but none of the responsibility they hide behind the research houses.

The stockbrokers buy/sell/hold stock level recommendation is largely a technique to encourage transactions - which is how stockbrokers traditionally made money. Rather than trying to justify it as "general advice", now is a good time to get rid of that outdated and inappropriate system altogether. Change it to stock level forecasts of return and volatility, and let investors decide whether to buy/sell/hold based on their unique personal circumstances. If they don't have the expertise to make that decision for themselves, they should get personal advice.

I'm not talking about telling a specific person to buy a specific stock, I'm talking about putting out an opinion on a financial product to help people make up their own mind. Think about all those trading platforms where users can find research on companies and then decide themselves if they want to buy it and how much they want to put in. Many of my friends used these when we were younger and the research on those companies were in no way personal advice but they were still opinions with a recommendation so would fall within general advice. I'm not saying there aren't shoddy practices out there that hide behind general advice but to say no one should be able to give an opinion without it being personal advice isn't going to work.

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