Media statement in response to ASIC regarding findings from consumer research on ‘General Advice’ label
The FPA is disappointed ASIC has decided not to make any recommendations to the Government to address the harm caused by consumers misunderstanding the term ‘general advice’.
While renaming ‘general advice’ is not a silver bullet, it is the first step to make lasting change. At an appropriate point after renaming ‘general advice’, the Government should review the use of general advice to determine whether further changes are needed to protect consumers.
Multiple Government reports1 have shown that consumers are confused about the difference between ‘personal advice’ and ‘general advice’, and often misunderstand what they are receiving. This is seen in the High Court decision to dismiss Westpac’s appeal against the Full Federal Court’s finding that two Westpac subsidiaries provided ‘personal advice’ when they claimed to be providing ‘general advice’.
We stand by the recommendation in the FPA Policy Platform – Affordable Advice, Sustainable Profession – that the term ‘general advice’ be changed to ‘product information’ and ‘strategy information’, which better reflects the definition and is less misleading to consumers.
Any replacement must ensure that the term ‘advice’ can only be used in association with ‘personal advice’ – that is, advice that takes into consideration personal circumstances.
The FPA will continue to strongly advocate for one single meaning of the word ‘advice’ in the context of financial services and that is personal advice. ‘General advice’ is a term that continues to be misunderstood, misused and is misleading to consumers as seen in the action ASIC was forced to take against Westpac in the High Court.
1 Government reports and enquiries recommending changes to the term general advice:
- The Senate Economics Legislation Committee inquiry into the Corporations Amendment (Streamlining of Future of Financial Advice) Bill 2014
- The Financial System Inquiry Interim Report and Final Report
- The Treasury consultation on the Financial System Inquiry Final Report
- The Parliamentary Joint Committee on Corporations and Financial Services inquiry into proposals to lift the professional, ethical and education standards in the financial services industry
- The Senate Economics Reference Committee’s inquiry into the Scrutiny of Financial Advice
- Productivity Commission Inquiry into Competition in the Australian Financial Services
- Royal Commission into misconduct in the banking, superannuation and financial services industry