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.
General advice is a joke and shouldn’t be allowed. At the very least it shouldn’t be called advice. Why doesn’t ASIC just make the provision of personalised advice easier? The current approach is broken — no adviser can say that their clients read the SOA and PDS’s and fully understand them.
Industry union super masquerades behind ‘product’ or ‘general information’ all the time when convincing their members to blindly roll-over other super into their own, and yet when was the last time you heard (ever) of ASIC investigating, let alone fining or prosecuting their union mates?
If there is a significant increase in the numbers of personal advice advisers converting to become to general advice advisers, then this will be the death of our advice industry as we know it.
At the end of the day, when you look at it closely, the only way to offer general advice is to automate the process. In other words the adviser never actually gets to contact the potential client in a meaningful personal way.
Faced with the outrageous and totally unfair nature of the ASIC legal levy and the CLSR Levy (thank you very much Daryl) I’ve considered general advice, but ran away very quickly. Seasoned advisers like myself with over three decades of experience would be an absolute danger to themselves and their AFSL. We would find ourselves breaching ASICs rules merely by doing what we’ve always done – ask questions, identify need, offer a choice of solutions.We would be able to explain how a contract would work, but con’t comment on whether or not it is suitable for that particular client!! What a mess! That’s not advice, general or otherwise, it’s just plain product flogging.
ASIC has been in cloud cuckoo land on general advice for some time. thinking it be can be resolved with a well drafted script for the adviser to follow. The only reason general advice exists in the Corporations Act is because when the current advice regime was devised in the early 2000’s, the banks were heavily into the pockets of the Coalition, who were, and subsequently did,seek to flog crap risk products to unsuspecting customers.All those counter-staff in banks on brownie points selling dad insurance.
The whole concept of general advice falls in a big messy smelly heap when you ask just one question: can the client distinguish between personal advice and general adviceWhen talking to a licensed adviser? I submit they will never be able to determine the difference and they will always interpret information as “advice”. The subtleties of the Corporations Act is not something understood by most of our customers
Of course, our “friends” over the life insurers would, tagging onto the demands from Labors mates in the industry funds, welcome the ability to flog their crap products to unsuspecting customers who call the insurer, complaining about the cost of their current coverage. “Look here, Mr Smith, we have this other contract here, which is just like yours, and saves you 20%. Please read the PDS.Trust us, we are an insurer.” Danger close!!
It’s time to go, the parties over