We regularly get questions about the difference between factual information and financial advice.
The issue is important: from 1 July 2013, all financial services licensees must ensure they have systems and procedures in place to ensure representatives who provide personal advice must act in the best interests of customers and place the customer’s interests ahead of their own when developing and providing advice. You must also warn the client if advice is based on incomplete or inaccurate information.
Persons who provide financial product advice to retail clients must also comply with additional disclosure obligations under the Corporations Act from 1 July 2013.
Factual information is more likely to be advice if it makes a recommendation about what a client should do.
A recommendation or a statement of opinion constitutes financial product advice if it is intended to influence a person in making a decision about a particular financial product.
Financial product advice generally involves an evaluation, assessment or comparison of, some or all of the features of a financial product.
Under the Corporations Act, all financial product advice is either ‘personal advice’ or ‘general advice’.
Personal advice is financial product advice given or directed to a person (including by electronic means) in circumstances where the person giving or directing the advice has considered one or more of the client’s objectives, financial situation and needs.
All other financial product advice is general advice.
To assist you in applying these rules in practice you should consider ASIC RG175 and RG244.
RG175 contains the following examples of the difference between personal advice and general advice:
- Mailout to entire client list
- Investment seminar for all clients (which does not give personal advice in response to audience questions)
- Mailout of brochure in response to a client query
- Quoting from a PDS in response to a query
- Mailout to particular client groups
- Marketing campaigns to a market segment
- Investment seminars for particular client groups
RG 244 contains the following examples of giving information and advice:
- How to invest an inheritance
- The adequacy of retirement savings
- A retirement savings health check
- Changing investment options—Call centre conversation
- Insurance—Call centre conversation
- Making extra contributions—Email advice
- Paying a windfall into superannuation or mortgage
- Superannuation and Centrelink payments––Effect on age pension of accessing funds through superannuation or a mortgage redraw
- Transition to retirement
- How long will my account-based pension product last?
- Nomination of beneficiaries
- Motor vehicle insurance—Which level of excess?
- Information and advice about basic deposit products
- Advice from a stockbroker to an existing client.
