As part of the research, which was conducted by Newgate Communications on behalf of the corporate watchdog, qualitative interviews were conducted with 66 participants to gather feedback on possible alternative labels to the term “general advice”.
These labels were then narrowed down to a shortlist of 15 options that were tested in quantitative research with more than 3,000 consumers.
The research found that the circumstances in which general advice was given could greatly affect the degree to which consumers mistakenly perceived it as personal advice.
These circumstances included delivery of general advice over the phone, if the consumer had spoken to the person giving the advice previously, if direct questions were asked to the consumer and if they had provided information such as personal details.
However the research also found that the term used to describe the general advice “did not make any measurable difference to consumers’ understanding of general advice”, ASIC said.
“Many participants in the research did not notice the label. In fact, the survey results showed no effect on consumers’ understanding of general advice when a label was used compared to when no label was used,” the regulator said.
When participants in the qualitative research were asked to rate three randomly selected labels from the list of alternative terms, ASIC said “none of these alternative labels enhanced consumer understanding of the nature and limitations of general advice”.
Around eight out of 10 consumers surveyed also indicated they would seek further information after being given the general advice, regardless of the label used to identify it, the regulator said.
In light of these results, ASIC said it did not believe further action was needed to change the term “general advice”, despite this being a recommendation of several recent industry inquiries as well as submissions from a number of industry groups.
“The research found no evidence to suggest that changing the general advice label, including adding the word ‘only’ to the general advice label, will have any measurable effect on consumers’ perceptions about the nature of the advice given,” the regulator said.
ASIC said the research had identified “other ways” for providers to clarify the difference between general and personal advice rather than changing the term used, “such as by contrasting the descriptions of general and personal advice, and explicitly stating in the general advice warning that the provider of general advice is not required to act in the consumers’ best interests”.
Commenting on the results of the research, FPA chief executive Dante De Gori said the association was “disappointed” ASIC had chosen not to make any recommendation to “address the harm” caused by general advice.
“While renaming ‘general advice’ is not a silver bullet, it is the first step to make lasting change,” Mr De Gori said.
“Multiple government reports have shown that consumers are confused about the difference between ‘personal advice’ and ‘general advice’, and often misunderstand what they are receiving.
“We stand by the recommendation in the FPA Policy Platform that the term ‘general advice’ be changed to ‘product information’ and ‘strategy information’, which better reflects the definition and is less misleading to consumers.”
While ASIC said the government may look to address the issue further as part of its Quality of Advice Review next year, Mr De Gori said this was tantamount to ignoring the problem and “condemns consumers to another year of confusion and the risk of harm”.
New labels aren’t the answer
AFA acting CEO Philip Anderson said the research demonstrated while changing labels may not be necessary, action on general advice was still needed – but the issue was more complicated than ASIC’s remit allowed.
“What they are saying is that ASIC will not be making recommendations in relation to changing the label. I don’t think that means there’s not an issue with general advice – we certainly think there’s an issue with general advice in that people are getting it and thinking it’s personal advice,” Mr Anderson said.
“The point that ASIC is making is that it really doesn’t matter that much what the label is. People don’t understand the underlying concept that general advice is advice that doesn’t take into account their personal circumstances, they think when they’re having a conversation they’re getting advice they should be able to rely on.
“The problem has been highlighted by a number of reviews that have been undertaken. The question is what is the solution and I don’t think it’s a matter of changing a label.”
Mr Anderson said the research was also indicative of the fact that the “underlying problem” with general advice was not able to be addressed through regulatory guidance alone.
“ASIC were looking at what they could do, and they can’t do anything – it needs to be fixed by legal change. There’s a factor here which is that the government has told ASIC that they are not a policy maker, and this can only be solved by policy change,” he said.
“If you look at that Westpac case which is referred to in their announcement, the thing is they had set up a business model that was providing general advice but the consumers and the High Court formed the view that it should have been personal advice. It’s an illustration of the fact there’s an underlying problem which is not solved by changing labels.”
All ASIC staff are trained in gaslighting advisers from Day 1.
[quote=Anonymous]Apparently giving advice on TV, radio, newspapers, blogs, podcasts or even books is fine and doesn’t require any disclosures, disclaimers, appropriate FASEA-accredited education, etc even if thousands are going to act on that advice and could be at risk of severe detriment, or implementing inappropriate products, strategies and advice. Put someone who has experience, knowledge and an understanding of a client’s situation in front of a person though and suddenly you need MORE documentation and are at MORE risk as an Adviser than those snake oil salesmen who have no obligations or risks whatsoever. Yep, makes sense.[/quote]
To be fair he is providing financial coaching and general advice principles under the guise of gerenal advice. He doesn’t make a personal product recommendations for Risk, Super or any other classified financial product. So I’m not sure what your bug bear is with the barefoot investor. If anything he is driving more Aussies to seek professional advice by opening their eyes to the complexity of our financial system.
Have you not read the part in the book where he says put your super into the Hostplus Diversified Index fund. Sounds like a product recommendation to me (and sadly to the thousands that follow him).
I have clients come in and tell me they are doing things because they have read the barefoot investor. Whilst the appropriateness of this isn’t always bad and often more beneficial than had the client done nothing, some principles espoused or followed by the clients are clearly not in their best interest.
It quickly becomes evident when talking to the clients they deem the barefoot investor as advice.
ASIC are a law unto themselves. They can pick and choose what suits them best to change or implement, and they can do likewise when acting as judge, jury and executioner. The perfect example is where you get a bank hauled before the regulator for aiding money laundering, market rigging or breaches of AML regulations, who walk away with a financial penalty that’s a tiny % of their annual revenues. Compare this to an Adviser who doesn’t get FDSes out on time and instead of having to write to clients explaining, or reimbursing some fees they’re banned from the industry for years losing their reputation, years of knowledge and education they sacrificed to get, losing jobs, incomes, families and mental health. All for a piece of paper that makes no sense in the first place and clients don’t want. But the banks can assist human and sex trafficking, drugs, money launderers, corruption, etc and they keep on going. How does this make sense to any politician let alone anyone with half a brain?
Of course ASIC won’t change the fraud that is General Advice as it is the biggest scam of ALL Industry Super Advice / Sales.
Industry Super Call Centre jockeys with zero Advice education, experience, zero AFSL compliance, zero BID, no FARSEA.
ASIC’s REGULATORY CAPTURE CORRUPTION at it’s worst for their best buddies Industry Super.
Disgusting ASIC, drain the swamp and start again.
Have you ever wondered how research findings are made? How even with the highest standards of research many drugs get accepted that then turn out to have no effect? Have you heard of push-polling or the many ‘surveys’ where it turns out they are just cover for a hard sell?
Basically, you can get any outcome you want if you formulate the research question carefully, the setting in how and when it is asked, whom you ask, what you ask in the questions before etc.
The basic question here was whether ‘general advice’ is ‘advice’? If ASIC would have asked “are clients likely to mistake general advice for personal advice?” as the research question and then gave ‘general advice’ to people and then asked them whether they received personal advice, the answer would have very often been yes.
In that case the conclusion is that general advice should not have the word ‘advice’ within it as just about anything with the word advice will be understood as personal advice if given person to person. Therefore ‘general advice’ should be disallowed. Poor Dante, having to explain the obvious without getting any traction.
I understand why Government is moving forward in incremental steps. The fear of unintended detrimental consequences is driving that. We have financial advisers who have qualified up under FASEA – and who are remodeling their businesses to be able to deliver quality and affordable advice to their clients. It’s time for Government to support them. The answer is simple – [u]separate product sales from advice[/u]. This has been on the table for years and remains to be addressed. Anyone who deals with a customer/potential customer – and who is paid in any shape or form by a product providing organisation is and always will be conflicted. Any person who is paid in any way by a product providing organisation must be required to disclose that up front and clearly – eg “I am paid this way – I am acting for …… (the product providing organisation) – I am here to maximise the profitability of …….”. With a clear delineation between product sales and advice – “real” financial advisers will be able to focus on their job – to deliver quality and affordable advice – and clients will be protected. It’s time for real leadership from Government.
Why the f**K are they paying for this research. Just change the names of them to make it clearer and be done with it.
ASIC aren’t paying.
Advisers are paying to stitched up yet again
Just to summarise this article:
1. ASIC paid for a study to see if the term general advice was working and understood by the general public.
2. The report showed that the public not understand the difference between general and personal advice
3. ASIC thought that was OK and will not make any changes.
Besides the FPA’s suggestion (that won’t actually make any difference), I just have one question. Why did ASIC do a study if they weren’t going to make any changes?
Our ASIC fees increased substantially this year and I would appreciate you not wasting the money we give you on silly exercises like this.
It was not a silly exercise. It was much more harmful than that and great value for money for the beneficiaries.
Industry Super love their buddies ASIC green lighting call centre jockeys, no AFSL compliance, no FARSEA code, no Regulations. Just single product sales. Awesome hey ISA & ASIC.
If there has ever been a case of fee for no service it’s ASIC. There is clearly a problem with one sector of the advice profession providing researched personalised advice having to follow onerous regulations to do the most basic of transactions. While another sector aims to avoid all the regulations and hide behind general advice term. Their research shows that clients can’t see the difference. So what does ASIC do? Stick their heads in the sand. No wonder some many roles are being taken off them to move to Treasury.
Barefoot gives great advice, even the CEO of HostPlus said so….in the Royal Commission….no less!
Barefoot gave his financial advice licence back. Barefoot is smart.
Apparently giving advice on TV, radio, newspapers, blogs, podcasts or even books is fine and doesn’t require any disclosures, disclaimers, appropriate FASEA-accredited education, etc even if thousands are going to act on that advice and could be at risk of severe detriment, or implementing inappropriate products, strategies and advice. Put someone who has experience, knowledge and an understanding of a client’s situation in front of a person though and suddenly you need MORE documentation and are at MORE risk as an Adviser than those snake oil salesmen who have no obligations or risks whatsoever. Yep, makes sense.
Yeah, don’t change the label, just go after advisers for giving general advice that the ‘reasonable person’ views as personal advice.
So, let’s detail all our general advice in SOAs/ROA’s…that’s an easy solution right? Ramp up your compliance documents to keep you out of harms way
Oh, but wait, your SOA production has now increased, meaning your costs have too!
All while the poor ol’ government says we need to be mindful of cost of advice to the clients, so don’t charge too much to your clients even though your production cost has ramped up.
Big facts, no one in the regulator or the government has boots on the ground experience in this industry and has ZERO idea how to regulate it.
At this point, you’d be better flogging property and handing out poor quality unlicensed advice. No regulation, no care & even worse outcomes to clients.
Not a new issue. At a previous employer, we remediated an Enforceable Undertaking on exactly this issue about 20 years ago (one of a number booting around at the time as I recall). The confusion between general and personal advice has persisted and raises it’s head every so often. I reckon real work to fix this is long overdue!
C’mon ASIC, advice is advice, the term should be general information only, it should not be called advice. Not rocket science people. Wakeup !
Meanwhile ASIC permits tens of thousands of “sophisticated” retail investors to make millions investing in cryptocurrencies lol