AIOFP warns members – keep it factual, not general

The Association of Independently Owned Financial Professionals (AIOFP) is urging members to tread carefully if they are contemplating moving to a general advice model in the wake of the education changes which come into effect on 1 January, next year.

AIOFP executive director, Peter Johnston said members might be wrong to consider the general advice model as a viable alternative to look after clients and their practice.

Johnston cited a position paper from policy expert, Lionel Rodriques in issuing his warning.

“Don’t want to be the ‘party pooper’ [for some] but have a read of the attached paper from Lionel, it is very clear some will be getting into very dangerous territory if they go into this arrangement ‘blindly’,” Johnston told members.

“It also seems some AFSL’s are seizing on a marketing opportunity to recruit Advisers without understanding the facts.

“ASIC had a very conclusive victory in the High Court against WESTPAC with a unanimous judgement over this issue a few years ago. Fundamentally Westpac argued they were only giving product information – they were wrong,” Johnston said.

The position paper provided by Rodriques pointed to the Westpac case which he noted was commonly known as the “General Advice Case” within which Westpac wrote to its i BT Superannuation members, via the ‘Super Activation Team’, offering to conduct, at no cost, a search for other superannuation funds that the consumer may hold and then to rollover those such funds into their existing BT Superannuation account.

Rodriques pointed to the case as supporting the view that institutions “should not be allowed to masquerade or disguise what consumers deem to be ‘advice’.

“The courts have been very clear that only factual information can be given. In the above two cases, the Justices of both courts, were unanimous in their views as to advice and the duties and obligations owed to the consumer. “

I would recommend that the emphasis be given not on the terms ‘personal or general advice; but on only the provision of ‘factual product information.’  Under this situation then, there may not be any need for the onerous responsibilities of licensing or to pass the FASEA exam. This could be the ‘carve out’ you were suggesting,” Rodrigues wrote.