The Australian Securities and Investments Commission (ASIC) will not be the final arbiter of the status of ‘general advice’ with the ultimate decision residing with the Federal Treasury in a process which will be considered in the broader context of financial advice, including the status of the Life Insurance Framework (LIF).
Despite ASIC having provoked the ire of the Financial Planning Association (FPA) by using consumer research to conclude it did not believe changing the description of “general” advice was warranted, the decision ultimately resides with the Treasury and will not be known until at least the end of next year.
Just as deciding the future of the LIF was stripped from ASIC and directed to the Treasury, the future status of general advice will also be determined by the Government-initiated Quality of Advice Review to be conducted under the auspices of Treasury next year, notwithstanding ASIC’s current affordable advice review.
What is more, ASIC has acknowledged its limited role in the general advice debate, noting that while it was adopting a no-action position on ‘general’ advice, the findings of its consumer research had been sent off to Treasury “to assist with the broad view”.
Treasury is expected to call for industry submissions around the Quality of Advice Review towards the end of this year which will give the major planning groups the opportunity to put their arguments some of which have already been canvassed in the Financial Services Council’s (FSC’s) recently-released advice green paper which argues that the recent High Court Westpac Securities v ASIC ‘general advice decision’) demonstrated that “the traditional model of general advice is unworkable in almost all circumstances”.
As well, Association of Financial Advisers (AFA) acting chief executive, Phil Anderson pointed to his organisation’s position that the middle ground of “general advice” sitting between product information and personal advice should be removed altogether thus eliminating any scope for confusion.
He said the existence of “general advice” left too much room for manipulation.
The FPA’s dissatisfaction with the no-change position taken by ASIC is that it leaves the word “advice” in place, thus continuing to confuse consumers.
“The Quality of Advice review won’t be completed until at least 2022 and ASIC’s decision to ignore the problem with ‘general advice’ until then condemns consumers to another year of confusion and the risk of harm,” the FPA chief executive, Dante De Gori said.
The bottom line from an industry standpoint, is that while the FSC, FPA and AFA are each coming at the status of ‘general advice’ from different standpoints, they all agree that it should cease to exist in its current form.