Greater clarity around general advice warnings needed: FAAA

In May, the Australian Securities and Investments Commission (ASIC) announced it was seeking feedback on its proposal to make three legislative changes related to financial advice into a single instrument.

The instruments in question include:

• ASIC Corporations (Advertising by Product Issuers) Instrument 2015/539

• ASIC Corporations (General Advice Warning) Instrument 2015/540, and

• ASIC Corporations (Financial Services Guides) Instrument 2015/541.

The instruments were set to expire on 1 October 2025 and, as such, ASIC has also proposed a five-year extension on the subsequent legislative instrument.

In its submission responding to ASIC’s request for feedback, the Financial Advice Association Australia (FAAA) was supportive, for the most part, of the instruments in their current form. However, the association did note some existing challenges when it comes to general advice that should be addressed.

Namely, although the FAAA supported the “flexible approach” in LI 2015/540 allowing general advice providers to give a simplified general advice warning when providing oral general advice, the association did raise concerns regarding potential consumer confusion when it comes to distinguishing between general and personal advice.

The FAAA suggested that clients often understand that one-to-many general advice delivered through advertising, presentations and webinars or published articles is general in nature.

However, when it comes to one-to-one general advice, the distinction between general and personal advice is commonly misunderstood and could benefit from clearer explanations of the “pros and cons of each approach”.

“More could be done to alert these recipients of financial product advice to the limitations of general advice in both the written and verbal warnings,” the submission added.

Looking at the other two legislative instruments being reviewed, the FAAA was supportive of their current measures and welcomed both the melding of the three instruments in question into a single instrument and the extension of it for a further five years.