Treasury could opt to scrap general advice entirely as part of its 2022 Quality of Advice Review, but the move would need to be carefully reviewed to ensure it doesn’t further restrict consumer access to financial information, an industry association has said.
AFA acting chief executive Phil Anderson said one possible solution to problems with general advice – which were not able to be solved by changing the name used for the term, according to a recent ASIC report – was to eliminate the advice as a category altogether to reduce consumer confusion.
“Maybe the right outcome is that it’s no longer possible to provide what is currently called general advice, which is a recommendation that doesn’t take into account the client’s circumstances,” Mr Anderson said.
“Maybe we should have factual information and personal advice, and personal advice always needs to take into account the client’s personal circumstances.”
The FSC’s recent green paper “Affordable and Accessible Advice” similarly recommended the abolishment of general advice “as a standalone definition” in the advice licensing system, with its elements to be “subsumed” into a new legislated term of general information.
However ASIC’s recently commissioned research of around 3,000 consumers had found that the term used to describe the type of advice or information being received made little difference to consumer understanding, with the method of delivery – such as when call centre staff asked specific questions about a customer’s circumstances – likely to cause the most confusion.
Based on the findings of the research, the regulator said it would not be making findings to government to change the term associated with general advice, and would instead provide the report to government to assist with its broader review of the quality of advice, due next year.
Mr Anderson said this was the right move given that further restricting or removing general advice may have further consequences for consumers.
“It’s one thing to say that it’s a problem, and that has been made clear from previous inquiries – the next issue is what is the solution and how do we ensure that solution doesn’t cause unintended consequences,” he said.
“If we remove the option of general advice, what are the consequences? That might mean some clients are now not able to get cost-effective solutions to their needs if all they needed was general advice. I think the review needs to look at it more closely.”
He added that while the AFA was “not supportive” of business models that promoted irresponsible delivery of general advice – off the back of the regulator’s recent High Court win against Westpac around phone-based advice that was found to be personal – it was only fair that those who did provide general advice be able to argue the case for retaining it.
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