ASIC Chair James Shipton has given a clear indication that the regulator is concerned about the industry’s delivery of general advice at a recent Committee for Economic Development event in Melbourne.
During a keynote address Shipton revealed ASIC’s “seven principal strategic priorities” for the coming 12 months, which will support its vision for a “fair, strong and efficient financial system for all Australians”.
Key among these priorities was a desire to address “poor financial advice outcomes”, with Shipton highlighting the use of general advice.
“We are focused on improving the professionalism of financial advisers,” Shipton said. “We will address misconduct and consumer harm in the advice sector, particularly as they may arise from the industry’s shift towards using general advice models.”
The warning comes after the Australian Securities and Investments Commission published its Financial advice: Mind the gap report in March, which concluded that most consumers were unable to clearly distinguish the key differences between general and personal advice. Of particular concern was the finding that only 53 per cent of people in the study correctly identified general advice in a given scenario and only 19 per cent identified personal advice.
Of major concern for the regulator was the ambiguity of the term ‘general advice’, and whether people understood that their personal circumstances were not considered and the person giving the advice was not obliged to consider their best interests.
“Some participants thought that general advice would still include consideration of a consumer’s financial circumstances, but would only provide broad, rather than specific, recommendations,” the report stated.
At the CEDA event Shipton went on to say that ASIC is looking at the labelling of advice, and is “testing more appropriate labels and descriptors for general advice”. The move was also mentioned by ASIC director of wealth management, Joanna Bird, at the Professional Planner licensee summit in June, who said the “maybe more than one label” could be required for general advice.
“There’s a big range of general advice,” Bird added. “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.”