Is a general advice only model an option?
AFA News 18 November 2021. The AFA has recently received a number of questions from advisers who are yet to pass the FASEA exam, who are responding to suggestions that they may be able to continue to operate after 1 January 2022 (or 30 September 2022 if they have had at least 2 attempts at the exam), in the capacity of a general advice only adviser.
Definition of personal advice
In responding to these questions, we have been very careful to explain that it is very difficult for a financial adviser to deal with clients (particularly existing clients) in a general advice only manner. In part this comes back to the definition of personal financial advice in Section 766B(3) of the Corporations Act:
(3) For the purposes of this Chapter, personal advice is financial product advice that is given or directed to a person (including by electronic means) in circumstances where:
(a) the provider of the advice has considered one or more of the person’s objectives, financial situation and needs (otherwise than for the purposes of compliance with the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 or with regulations, or AML/CTF Rules, under that Act); or
(b) a reasonable person might expect the provider to have considered one or more of those matters.
General advice is financial product advice that is not personal advice, which means that it is a recommendation or a statement of opinion that is intended to influence a person to make a decision in relation to a particular financial product or class of financial products, without taking into consideration the client’s personal circumstances.
In a recent High Court case between ASIC and Westpac, the actions of superannuation fund call centre operators were deemed to be personal advice due to the fact that they had access to the superannuation member’s personal records and it was reasonable to expect that the call centre advisers would have considered the member’s personal circumstances in recommending that they consolidate their superannuation.
So, it is not just whether you have considered the client’s personal circumstances, but also whether a reasonable person might have expected you to have considered the client’s personal circumstances.
Can a financial adviser give general advice only?
Seemingly this prospect of general advice only is being given consideration by a number of risk advisers. Risk advisers know too well that clients typically have a very limited level of understanding of the life insurance products that are available and what level of cover they might need. In giving general advice only, you would not be able to inquire into the clients existing insurance (including what they hold through superannuation), nor what debt they have or other factors that influence the level of cover they may need. This would be particularly challenging for financial advisers who have for many years provided excellent advice to clients, that is tailored to their specific needs and circumstances.
We caution against existing advisers seeking to pursue this option and seek to highlight how difficult it will be to continuously meet your obligations and avoid providing personal advice or being considered to have met the criteria for personal advice. Issued 18.11.2021. AFA Policy & Education Update End.
For any questions on personal advice versus general advice please email email@example.com
Issued 18.11.2021. AFA Policy & Education Update