General advice should not be labelled advice at all, says FPA
Following the recent research from ASIC that found many consumers are confusing ‘general’ and ‘personal’ advice, the Financial Planning Association of Australia (FPA) is once again calling for the separation of financial advice from financial product marketing and product information.
Released on 28 March, ASIC’s Financial advice: Mind the gap report found that only 53 per cent of those surveyed could correctly identify ‘general’ advice, and only 19 per cent could correctly identify ‘personal’ advice.
The results highlight there is significant confusion among consumers, and within industry, media and Government about the definitions and roles of a qualified financial planner who provides personal advice, and institutions and non-qualified individuals who simply sell financial products.
Commenting on the ASIC report Dante De Gori CFP® CEO of the FPA, said: “Trusted and transparent financial advice is the right of every Australian. And whilst it is extremely important that more Australians seek advice, it’s just as important they know what they’re getting.
“Financial advice should ONLY mean financial advice. This means it should always require that the advice addresses the needs, objectives, and circumstances of the client, and the client’s best interests should always be prioritised over the interests of the advice provider and related entities. Anything else, should not be labelled advice.”
The FPA has consistently called for the separation of financial advice from financial product marketing and product information, and was encouraged that the Financial System Inquiry Final Report in December 2014 adopted the same position, and the Parliamentary Joint Committee on Corporations and Financial Services also came to a similar conclusion on this issue.
A Productivity Commission recommendation released in August last year also urged the Government to clarify the law between the two forms of advice.
The FPA recommends that the Government should act now and amend the Corporations Act to change the term ‘general advice’ to ‘general information’, and also recommends that the terms ‘financial advice’ and ‘financial product advice’ should only apply to personal advice as defined by the Corporations Act.
“General advice poses a significant risk to consumers when they do not know how to distinguish if they are receiving a financial advice service, or are receiving financial product information. Following the findings of the Royal Commission, Australians should not have to contend with this uncertainty and we urge the Government to implement our recommendations in full,” said Mr De Gori.