ASIC’s Financial advice: Mind the gap report used hypothetical advice scenarios to test consumer recognition of when general and personal advice was being provided, and awareness of adviser responsibilities when being given each type of advice.
It found that only 53 per cent of those surveyed could correctly identify ‘general’ advice. Even worse, only 19 per cent of those surveyed could correctly identify ‘personal’ advice.
Further, 38 per cent incorrectly thought an adviser providing general advice had to consider their financial circumstances, while only 45 per cent thought an adviser providing personal advice had to act in their best interests.
Even when provided the general advice warning, nearly 40 per cent of those surveyed wrongly believed the adviser had an obligation to take their personal circumstances into account.
ASIC deputy chair Karen Chester said the disturbing gap in understanding whether the advice they are getting is personal or not means many consumers are under the false premise their interests are being prioritised, when no such protection exists.
“The survey also revealed that the responsibilities of financial advisers, when providing general advice, is not well understood. Nearly 40 per cent of those surveyed were unaware that advisers were not required by law to act in their clients’ best interests,” Ms Chester said.
ASIC said it anticipates the need for financial advice to grow, reflecting an ageing population and many financial products, especially retirement products, becoming more complex.
It reports that much of the advice is likely to be general advice, and while appropriate in some circumstances, it is inevitably of limited use.
“ASIC is seeing increased sales of complex financial products under general advice models – so not tailored to personal circumstances – leaving many consumers, especially retirees, exposed to the potential risk of financial loss,” Ms Chester said.
“And whilst the financial services royal commission, and the government’s response, dealt with the most egregious risks of hawking of complex financial products, consumer confusion about what is personal and general advice needs to be addressed.”
In addition, Ms Chester said the consumer research is timely, and comes as the government is considering policy recommendations on financial advice from the Productivity Commission’s twin reports on Australia’s financial and superannuation systems.
“[It’s] at a time when the financial system itself undergoes much change, following the intense scrutiny of the financial services royal commission, including considering new financial advice and distribution business models,” she said.
The ASIC report is the first stage in its broader research project into consumer experiences with, and perceptions of, the financial advice sector.
ASIC said it would undertake additional research in 2019 to identify a more appropriate label for general advice and consumer-test the effectiveness of different versions of the general advice warning.
Seriously how hard can it be to change the term GENERAL ADVICE to GENERAL/PRODUCT INFORMATION FFS???
C’mon ASIC pull your fingers out. You are soooo quick to come down on advisers and kill off their livelihoods, but can’t do a simple thing like this?
Here’s a very simple solution – don’t call Terry McMaster
The report is done, now do something. If it has the word advice in it then it should not be general. Call it product information or my preferred option of “product flogging that may or may not be in your best interest but I can’t tell because I don’t care”.
The industry is a farce as are the regulators, the large corporates and our professional bodies i.e. all of those responsible for the mess, including successive governments,.. For years Advisers have sat back and copped all of the garbage thrown at them. Time for a revolution..
[quote=Anonymous]Here’s a very simple solution – don’t call it general ‘advice’ – call it general info or factual info. Anytime you include the word advice then of course consumers are going to assume that the advice given to them has taken their personal circumstances into consideration. Since the terms Financial Adviser and Financial Planner have already been enshrined in law, why not enshrine the terms ‘financial advice’ or ‘personal advice’? Consumers will then be able to discern that only financial/personal advice that has been provided by a licensed and qualified FA/FP has taken into consideration their particular circumstances and is in their best interest. If the government legislates to ban the banks and super funds from using the term general advice that would go a long way towards enabling consumers to be able to differentiate between general info and financial advice.[/quote][quote=Anonymous]Here’s a very simple solution – don’t call it general ‘advice’ – call it general info or factual info. Anytime you include the word advice then of course consumers are going to assume that the advice given to them has taken their personal circumstances into consideration. Since the terms Financial Adviser and Financial Planner have already been enshrined in law, why not enshrine the terms ‘financial advice’ or ‘personal advice’? Consumers will then be able to discern that only financial/personal advice that has been provided by a licensed and qualified FA/FP has taken into consideration their particular circumstances and is in their best interest. If the government legislates to ban the banks and super funds from using the term general advice that would go a long way towards enabling consumers to be able to differentiate between general info and financial advice.[/quote]
it will take them another 9 years
Just because you make the distinction at law doesn’t mean the ordinary australia understands your word salad soa and voluminous disclosures for disclosure sake.
we have been telling you that for ages. make advice simpler, so we can give more good advice and clients will implement it for god sake.
Welcome to the complex world of life insurance sales, Ms Chester. In our world you will need flexibility, not the rigid neo-con theories you produced at the Productivity Commission, nor the rampant ideology against risk commissions at ASIC. GENERAL ADVICE has been an ASIC favourite for years, despite all the warnings from personal risk advisers who review the evidence every day. ASIC has allowed the banks to flog rubbish under GENERAL ADVICE-why? ASIC knew of Freedom Insurance, but did not act, and may have approved the scripts being used in call centres.. ASIC lets industry funds offer intra-fund advice on GENERAL ADVICE! Is that because the banks, the industry funds and Freedom claimed to pay “salaries”, not commissions. The answer, my dear Ms Chester, is to BAN GENERAL ADVICE !!!
I agree. I was an FA previously before immigrating to Australia. I cannot practice as an FA anymore due to legislative requirements and I now work in an environment where I need to provide general advice and this is very hard for me and for my clients
[quote=Anonymous]The solution is simple, ASIC must compel product manufacturers be they insurance or investment based to disclose to the end customer. Firstly if the advice they are receiving is general or personal but more importantly if that product can be obtain from the same manufacturer through a personal advice channel then the end customer must be advised of that availability and the advantages they may receive from that alternative.
The simplest example of this is the purchase of life insurance. ASIC is well aware that the large majority of product manufacture distribute life insurance through the direct channel (TV or directing marketing to the consumer), platform provided ( superannuation or standalone group insurance ) or through the retail advice channel. ASIC also knows that the quality and cost of the product varies from these three different channels as does the claims experience with the retail advice (personal advice) providing the better outcomes.
If ASIC is serious this would be a simple and quick step to implement and if it fails to I can guarantee that this will be the subject of the next FS Royal Commission following the inevitable flood of consumers complaints that will follow when the end customers discover that the policies they purchased did not provide the protection they expected.
The consumer cannot make these decisions without it being informed of the facts and ASIC has the power and the social duty to impose this obligation on the product manufacturers.
[/quote]
Here’s a very simple solution – don’t call it general ‘advice’ – call it general info or factual info. Anytime you include the word advice then of course consumers are going to assume that the advice given to them has taken their personal circumstances into consideration. Since the terms Financial Adviser and Financial Planner have already been enshrined in law, why not enshrine the terms ‘financial advice’ or ‘personal advice’? Consumers will then be able to discern that only financial/personal advice that has been provided by a licensed and qualified FA/FP has taken into consideration their particular circumstances and is in their best interest. If the government legislates to ban the banks and super funds from using the term general advice that would go a long way towards enabling consumers to be able to differentiate between general info and financial advice.
Yep the answer is cutting commissions more.
The solution is simple, ASIC must compel product manufacturers be they insurance or investment based to disclose to the end customer. Firstly if the advice they are receiving is general or personal but more importantly if that product can be obtain from the same manufacturer through a personal advice channel then the end customer must be advised of that availability and the advantages they may receive from that alternative.
The simplest example of this is the purchase of life insurance. ASIC is well aware that the large majority of product manufacture distribute life insurance through the direct channel (TV or directing marketing to the consumer), platform provided ( superannuation or standalone group insurance ) or through the retail advice channel. ASIC also knows that the quality and cost of the product varies from these three different channels as does the claims experience with the retail advice (personal advice) providing the better outcomes.
If ASIC is serious this would be a simple and quick step to implement and if it fails to I can guarantee that this will be the subject of the next FS Royal Commission following the inevitable flood of consumers complaints that will follow when the end customers discover that the policies they purchased did not provide the protection they expected.
The consumer cannot make these decisions without it being informed of the facts and ASIC has the power and the social duty to impose this obligation on the product manufacturers.
Well what is the solution then ASIC??? Do another survey perhaps?
Perhaps letting industry super funds flog their products continuously on telly with the only consideration being fees and no regard for any personal circumstances is problematic – ah wait now, they are above the law and ought not be subject to any rules.
I wonder what would happen if you asked a consumer about intra-fund advice – it cannot be in the client’s best without understanding their situation and most clients would come away thinking they’ve received advice personalised to their situation…. broken system
When you have journalists / people who are maybe licensed to only give general advice but go much further – like Scott Pape (Barefoot Investor, has his own AFSL to give general advice) and Nicole Pedersen-McKinnon (Financial Educator / “qualified financial adviser and stockbroker”), there’s no wonder why this is the case.
Unfortunately after FASEA, the ever increasing compliance burden, increased costs, removal of risk commissions and all the other measures aimed at culling the financial advisers, the vast majority of clients will only ever be able to access General Advice. The product manufacturers will be able to sell their sub standard investments/insurances to everyone without the protection provided under full advice and without the need to comply with the Best Interests Duty.
Surely ASIC and some other public servants can see that this will be the case. I just dont think they realise the rammifications of removing the client protections provided by full advice.
It is astounding to me that a backpacker with a days training is able to sell the same products (super/insurance) as a financial adviser. And that backpacker does not have to hold a degree, do continual study, hold professional indemnity insurance, prepare an advice document or worst of all not have to act in the best interests of the client. That backpacker is also able to get paid the full insurance commissions (equal to the adviser commissions) but has done a 10th of the work and when things go wrong they can just hide behind the guise of general advice.
The results are a no brainer and due to the size of the sample, probably underestimate the actual amount of confusion.
Answer- from ASIC – another sample in the future. ASIC get real and address the issue now if you are in any way serious about solving the “” confusion “”.
ASIC morons – General Advice is one of the most stupid concepts ASIC have allowed and given how many stupid things ASIC do that is saying a lot.
General Advice = PRODUCT INFORMATION.
It is not advice and should never have been allowed to be called Advice.
The Banks and Insurance Companies have of course totally abused this rubbish of General Advice to flog products with zero AFSL compliance.
ASIC wake the Hell up – get rid of General Advice and call it PRODUCT INFORMATION !!!!!!!
I would like to know the stats of the people who were sampled if they have gone to a planner or not and just were asked generic questions? People don’t know what they don’t know. Bit like the Govt
So let’s scrap General Advice and leave the advice business to competent advisers.
Hello RC… where were you
So wouldn’t it be a good idea for ASIC and the Government to simplify advice for clients and Advisers instead of increasing the number of documents full of jargon the client has to receive? Or is that too practical and efficient for a government body full of public servants lacking any real world experience or knowledge to comprehend?
Reduce the compliance burden on advisors and we will be able to provide cost effective personal advice. This then means consumers will not rely on TV, books, radio for advice which is not specific to them. it is not difficult ASIC!