Home / Life Insurance / Ditch general advice label, FPA says
8 April 2019
The Financial Planning Association (FPA) wants the term “general advice” scrapped, after a report by the corporate regulator revealed different advice terms confuse consumers.
Independent research commissioned by the Australian Securities and Investments Commission (ASIC) shows only 53% of respondents correctly identified “general” advice, and even when provided with the general advice warning almost 40% wrongly believed an adviser was obliged to take their personal circumstances into account.
Only 19% could correctly identify personal advice, in which an adviser must take a client’s personal circumstances into account.
The FPA wants the term general advice amended to “general information”. It wants any phrase including the term “advice” to apply only to personal advice, as defined by the Corporations Act. Product information and marketing should be separated from that, it says.
“General advice poses a significant risk to consumers when they do not know how to distinguish if they are receiving a financial advice service, or are receiving financial product information,” FPA CEO Dante De Gori said.
“[Financial advice] should always require that the advice addresses the needs, objectives and circumstances of the client, and the client’s best interests should always be prioritised over the interests of the advice provider and related entities.
“Anything else should not be labelled advice.”
Future of Financial Advice obligations to act in a client’s best interests and provide advice appropriate to their circumstances apply only when personal advice is provided.
ASIC has noted increasing sales of complex financial products under general advice models that are not tailored to personal circumstances, leaving consumers exposed to financial loss.
A Productivity Commission report last year urged the Government to clarify the difference between the two forms of advice.