ASIC has announced that it will not be making recommendations to the Government in relation to changing the label of general advice.

‘General advice’ is financial product advice that is prepared without considering a consumer’s personal circumstances such as their objectives, financial situation and needs. General advice does not come with the same legal obligations as personal advice but ASIC says the research shows consumers may not understand the difference. Background.

ASIC’s decision follows independent consumer research which found that changing the ‘general advice’ label alone is unlikely to prevent confusion about the nature of general advice.

ASIC commissioned the consumer research in response to the Financial System Inquiry Final Report and the Productivity Commission Inquiry Report into Competition in the Australian Financial System. The reports recommended that general advice should be re-labelled to ensure that consumers are able to clearly distinguish between personal advice and general advice.

The consumer research found no evidence to suggest that changing the general advice label, including adding the word ‘only’ to the general advice label, will have any measurable effect on consumers’ perceptions about the nature of the advice given. This includes perceptions about the personalisation of the advice, understanding of the advice provider’s obligations and the importance of seeking further information.

ASIC says the consumer research made the following findings:

• Finding 1: There was no evidence that a change in the label will change consumers’ understanding of general advice.
• Finding 2: No alternative labels to ‘general advice’ were found to be a significantly better fit with the description of general advice.
• Finding 3: The circumstances in which general advice is received could significantly increase the risk of consumer misunderstanding of the nature of the advice given. Participants’ perceptions that the general advice was tailored to their personal circumstances was increased when the hypothetical interaction was personal in nature, such as when the advice was given one on one (in person or by phone); they had some prior relationship with the person giving the advice; they had asked a direct question about what would be best for them; and/or they had provided some initial contextualising information (e.g. personal details).
• Finding 4: Consumers felt it was important to seek further information regardless of what label was used to convey general advice.
• Finding 5: There are other ways advice providers can clarify what is meant by ‘general advice’. The research also identified potential means of clarifying general advice to consumers such as by contrasting the descriptions of general and personal advice, and explicitly stating in the general advice warning that the provider of general advice is not required to act in the consumers’ best interests.

Separately, the Government has announced it will ask Treasury to review the quality and affordability of financial advice.

If you found this article helpful, then subscribe to our news emails to keep up to date and look at our video courses for in-depth training. Use the search box at the top right of this page or the categories list on the right hand side of this page to check for other articles on the same or related matters.

Author: David Jacobson
Principal, Bright Corporate Law
Email:
About David Jacobson
The information contained in this article is not legal advice. It is not to be relied upon as a full statement of the law. You should seek professional advice for your specific needs and circumstances before acting or relying on any of the content.