The term general advice “should be scrapped” and be labelled as general information, according to a digital advice solution, Scientiam.
In its QAR submission to Treasury, founder Nigel Baker said the change would strengthen consumer protections, minimise confusion and encourage more exploration and investment in digital advice and information solutions.
“When it comes to digital solutions, there are some concerns about the quality of information currently being issued but quality comes back to the source, which is why qualified and experienced advisers should be leaders in general information,” Mr Baker said.
“General information, educational content and financial planning tools prepared and approved by advisers are always going to be better and lower risk than services offered by product manufacturers and unqualified finfluencers.
“Advisers are also strongly positioned to determine if a person is better suited to a personal advice proposition or general information. An integrated approach would maximise the probability of clients receiving high-quality information and advice throughout their life.”
Scientiam’s submission also question if employees of product issuers should be known as financial advisers and representing their services as financial product advice.
“Financial product advice is not advice. It should be called information. Intra-fund advice is not advice. It is a form of financial product information and that is not immediately clear to members,” he said.
“People linked to a super fund or product issuer can only provide information. To use a medical analogy, doctors provide independent advice. They may recommend medication and treatment, but they don’t sell it. Pharmacists sell product. The two propositions are very different and separate.”
Scientiam’s QAR submission comes just weeks after Mr Baker, who is also managing director of Arch Capital, called for advisers to unite and submit a “considered, fact-based submission” to the QAR directly or in collaboration with a professional association.
“If advisers want to help more people, they must take the lead in showing the government and regulators how quality advice can be delivered differently,” Mr Baker wrote in an opinion piece published on ifa.
“They must build advice models and solutions that meet the needs of consumers.”
Actually the term Factual Information should be scrapped before General Advice .
Common sense finally. Dictionary meaning of advice:
“guidance or recommendations offered with regard to prudent future action”
So have can you have general advice, it’s either advice or it’s not. Client goes to Holden to buy a Holden, clients goes to Australian Super to buy Australian Super, client goes to an advisor under a AFSL to enquire about Super or Life Insurance, that will be advice as which product is going to be the right one. The one that’s the cheapest? For now that is.
Compare the pair !
Yes, congrats Nigel Baker. This is way to common sense to happen but it should.
As advisers, it is more or less impossible to provide advice under the ‘general advice’ banner. Even if you found a way to do so, there is no way that compliance would approve anyway, not in today’s world. General advice is a legal loophole that allows direct insurers & industry super funds to sell products that cannot be in the best interest of the client, given the limited information provided. General advice should definitely go!
“General Advice” needs to be retained. There are instances where clients enquire about ASX listed entities and advisers supply research reports from stockbrokers or research houses. The adviser is not making a recommendation and is relying on the broker’s or research house’s evaluation of the company/ETF/LIC/LIT. No-one has made a judgement as to whether the security is appropriate for the client and the client will make a decision if they believe that it suits their portfolio and purpose. Further, in the absence of “General Advice” at the very least an ROA would need to be provided. However, due to the time it takes to write an ROA and send it through the licensee’s compliance team, it is likely that the client will miss the opportunity to invest in a security at a lower price. If there is no “General Advice” then the content of an ROA needs to be more appropriate for trading securities.
But you are describing general information, not advice. That’s the whole point. In practice everything is either general information or personal advice. “General advice” is a no mans land that creates confusion and facilitates regulatory bias.
“Intra-fund advice is not advice”? How is it not?
It must comply with the best interests duty and related obligations, it must be provided in an SOA, it must be based on up-to-date and complete member information, etc. Yes it has some carve-outs in that it must be limited to some fairly narrow topics and products, but saying it’s not advice is clearly incorrect.
Intra fund advice is just scoped advice to the members super fund retail or industry. doesn’t mean the advice is bad. how that service is paid for should be stopped. why should all the members of a super fund be charged for personal advice they might not use? they are mysuper option normally this means 95% of all members of that fund are in it.
So your saying Intra Fund Advice “..must comply with the best interest duty and related obligations,….” but you also say “Yes it has some carve-outs in that it must be limited to some fairly narrow topics and products”.
What is the point of Best Interest Duty when carve outs apply – just consider one product – how nice – good to sell product I guess?
yes Intra fund advice is personal advice and must comply with best interest duty. General advice on the other hand no best interest duty. if the clients goal has been achieved then the adviser has met best interest duty they are not caught up on other considerations etc
Just food for thought all these under performing funds are to do with mysuper products and lot of scope advice does mean that these clients if had the opportunity to review other options might have better retirement saving outcomes rather then seeing an intra fund adviser
General Advice… they must monitor the line between this charade and Personal Advice with a fine tooth comb.
Nigel makes some great points but his reference to professional associations needs to weed out those whose interests are blurred by the degree of institutional and other product manufacturers influence AND/OR those who are more about selling their education services and qualifications.