There is too much scope in general advice warnings for consumers to become confused and more precise labels are required to protect them, according to the ASIC director of wealth management Joanna Bird.
Speaking with Hillary Ray, a director at law firm Cowell Clarke, on stage at the Professional Planner Licensee Summit in Katoomba today, Bird said one of the main issues for regulator in the wake of the Hayne royal commission was “the increase in use of general advice to distribute products”.
“The nature of general advice is confusing to consumers and the general advice warning wasn’t tipping people off to the fact that the person providing the advice wasn’t acting in their interests or that the advice they were receiving was very limited,’ Bird explained.
The increased misuse of the general advice label was, she said, a reflection of the changes happening in the personal advice market. “We’re concerned about the practice,” she added.
Bird referred back to the Australian Securities and Investments Commission’s recent ‘Mind the Gap’ report, which showed that consumers had a poor understanding of what the ‘general advice’ – as opposed to personal and tailored advice – actually means.
ASIC has commissioned further research, Bird revealed, to look at different labels for general advice, which could mean “maybe more than one label”.
“There’s a big range of general advice,” Bird said. “There’s general advice that is pushing a product and there’s general advice which is just educational material. Maybe they shouldn’t be treated the same way.”
Crucial test case
ASIC’s focus on general advice comes while it appeals a Federal Court decision in favour of Westpac subsidiaries Westpac Securities Administration Limited and BT Funds Management Limited. In the case ASIC alleged the two providers provided personal advice to clients in phone campaigns by recommending consumers roll their superannuation accounts into Westpac-related accounts, despite not being licensed to do so.
The ‘test case’ was the first time the court had specifically considered s766B of the Corporations Act, which sets out the dividing line between general and personal advice.
ASIC made clear the relevance of the case, with commissioner Daniel Crennan remarking on their website: “It is important for a regulator to seek clarity from the Court,” he stated. “The dividing line between personal and general advice is one of the most important provisions within the Financial Services Laws. It directly impacts the standard of advice received by consumers. This is why ASIC brought this test case and ASIC believes further consideration by the Full Court of the Federal Court is necessary to better inform consumers and industry.”