The difficult gap between general and personal advice: Practical implications for advisers

In May 2019, ASIC released its Mind the Gap report on financial advice, which explained that many consumers – that is, retail clients are confused by the important distinction between general and personal advice.

Under the Corporations Act 2001, ‘personal advice’ considers the retail client’s objectives, financial situation and needs; alternatively, it is advice where a ‘reasonable person’ might expect the adviser to have considered one or more of those things. ‘General advice’ is advice that is not personal advice.

The distinction matters because financial advisers’ obligations vary depending on whether the advice is general or personal. Among other things, general advice requires a general advice warning, while in the case of personal advice, the adviser must provide a ‘Statement of Advice’. Advisers would be aware that personal advice demands more detailed consideration of the client’s particular needs, and so it is costlier to provide.

Failure to meet those obligations can result in severe consequences. In 2019, Parliament changed the laws that determine the penalties for breaches of these provisions. Civil penalties have significantly increased. For individuals, the penalty has moved from a maximum of a couple of hundred thousand dollars to over $1 million, or alternatively, three times the benefit derived from the breach. For corporations, the penalty moved from a maximum of just a couple of million to over $10 million, or alternatively, three times the benefit derived from the breach; or alternatively, 10 per cent of the corporations’ annual turnover, up to a maximum of over $500 million.

In short: a financial adviser’s failure to meet the obligations attaching to ‘personal advice’ can ruin them. It is thus important to be across the distinction. A recent dispute between ASIC and Westpac illustrates the slippery distinction between general and personal advice.

The ASIC v Westpac financial advice litigation

In light of consumer confusion identified in its Mind the Gap report, ASIC takes issue with the way that some advisers, including those associated with the big banks, label certain financial advice as ‘general advice’ when it is really ‘personal advice’.


ASIC commenced litigation to enforce that distinction in relation to Westpac. Among other things, it went after Westpac’s campaign to encourage consumers to roll over external superannuation accounts into Westpac accounts. The campaign included both written communications and phone calls, which led to ~$650 million more funds under management.

ASIC argued that Westpac’s campaign crossed the line: its staff had provided ‘personal advice’ without complying with their obligations. For example, they failed to provide a statement of advice.

At first, Westpac had a win. In December 2018, Justice Jacqueline Gleeson of the Federal Court of Australia held that the relevant advice was not ‘personal advice’ for the purposes of the Corporations Act because Westpac’s callers did not consider one or more of the objectives, financial situation and needs of the customers to whom the advice was given.

ASIC wins on appeal

ASIC did not take the outcome lying down — it appealed to the Full Court of the Federal Court. In October 2019, ASIC won, reversing Justice Gleeson’s decision. The advice was not ‘general advice’; it was personal.

The Full Court reaffirmed that ‘personal advice’ considers the needs of the individual customer: their personal objectives, personal financial situation, or personal needs. But even if those things are not considered when the financial advice is given, the advice may still be ‘personal advice’ if a reasonable person would expect the adviser to consider those things.

Put another way: if a reasonable person in the customer’s position would expect the staff member to consider their personal situation, then it is ‘personal advice’. Westpac was trying to tiptoe around the obligations that attach to ‘personal advice’, but that did not matter.

Justice Michael O’Bryan explained that Westpac’s staff had acted inappropriately when providing the advice:

"Despite knowing that the decision was not straightforward, Westpac did not advise its customers about the matters that they should consider before deciding to consolidate their superannuation. Nor did Westpac even suggest to its customers that they reflect on the decision or seek advice about the decision. Through the campaign, Westpac pursued its own self interest and disregarded the best interests of its customers."

Westpac loses a further appeal to the High Court

After losing before the Full Court, Westpac sought special leave to appeal to the High Court of Australia – our nation’s top court. In April 2020, the High Court provided Westpac with permission to argue that the Full Court was wrong. This means that there was yet another appeal, and another opportunity for judges to consider the meaning of the personal–general distinction.

The High Court heard arguments in October 2020. In February 2021, it dismissed Westpac’s appeal with costs. ASIC won big.

The High Court’s reasons are pretty straight-forward. They focus on the text of a key provision of the Corporations Act: section 766B. Within that section, the definition of ‘personal advice’ includes the fact that the provider of the advice ‘considered one of more of the person’s objectives, financial situation and needs’. This simply means that the provider considered some of the person’s situation, but not necessarily all of their objectives, financial situation and needs.

Just because Westpac characterised its advice as ‘generic’ or ‘general’ did not mean that it was not ‘personal advice’ for the purposes of the Corporations Act. The High Court held that a ‘reasonable person in the position of each of the members called by Westpac might expect Westpac to have in fact taken into account at least one aspect of the member's objectives, financial situation or needs’.

The text of the Corporations Act focuses on what a ‘reasonable person’ would expect of financial advisers. In the wake of the banking royal commission, attitudes towards what is reasonable are adapting to provide stronger protection for consumers. The High Court’s decision is reflective of that change. 

Practical implications for advisers

In the wake of the High Court decision, it is essential that anyone in the business of providing financial advice is across the distinction between personal and general advice.

It is clear that advisers are no longer able to rely on the defence that advice is general, given the absence of any knowledge of the client’s relevant personal circumstances.

The Westpac v ASIC case demonstrates that advisers must consider whether the general advice they are providing is truly of that character; and whether a reasonable person would expect the adviser to consider their personal objective, financial circumstances and needs in the provision of that advice.

It is prudent for advisers to, when in doubt, err on the side of caution and follow the obligations required for personal financial product advice.

Thaw Thaw Htin, principal, Bennett + Co Commercial Law, and Julia Vojkovic, director, Compliance Co


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The difficult gap between general and personal advice: Practical implications for advisers
Thaw Thaw Htin
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