Law changes must distinguish between product and advice

Any changes to the underlying fabric of financial planning laws need to take into account the difference between clients who have received personal financial advice and those who have not, according to The Advisers Association (TAA), representing AMP advisers.

TAA chief executive, Neil Macdonald has outlined his organisation’s submission responding to the Australian Law Reform Commission review and pointed out the need to tread carefully to ensure the needs of advice clients are not overlooked.

“Our submission calls for detailed impact statements on a wide variety of stakeholders, because in our experience financial adviser clients have very different needs to people who have only ever experienced product solutions, or have never received advice,” he said.

Macdonald said TAA is also very aware of the impact that so many recent legislative and regulatory reforms have had on advisers and that in some cases, it might be prudent to wait until Treasury’s Quality of Advice Review has been delivered, in order to avoid two sets of changes being implemented within a relatively short timeframe.

“Let’s look very closely at the potential impact of any changes on consumers, advisers and other stakeholders before we leap,” he said.

Macdonald said TAA is, however, very supportive of many of the ALRC recommendations, in particular the recommendation to simplify the definitions of ‘financial advice’ and ‘financial product advice’.

“We believe the time for separating financial advice from product is long overdue,” Mr Macdonald said. “There has been far too much focus in the law on financial product, to the detriment of financial advice, for far too long.”

TAA has made several other recent submissions, including to Treasury, ASIC and the Financial Services Council (FSC), calling for the separation of advice and product to better align with consumer expectations, reduce the risks of vertical alignment and recognise the changing operating environment of professional advisers.

“We have also consistently argued to replace the terms ‘general advice’, ‘intrafund advice’ and ‘roboadvice’ with other terms, which make it clear to consumers that they are only receiving information, not personal advice,” Macdonald said. “Therefore, we did not support the ALRC recommendation to substitute the term ‘financial product advice’ with the terms ‘general advice’ and/or ‘personal advice’ until after Treasury has completed its Quality of Advice Review.”

He said TAA firmly believes the term ‘general advice’ confuses consumers and raises false expectations and assumptions that they have received advice when they have not.

“Very few advisers provide ‘general advice’ due to Code of Ethics obligations, etc. and in many cases, consumers were provided with this ‘advice’ by product providers. In our opinion, pairing the word ‘advice’ with this kind of financial product information is not only incorrect but also potentially misleading.”