Commission Labels ‘General Advice’ as Misleading

The term ‘advice’ should be restricted to the activities of a professional adviser, according to the Productivity Commission, which has labelled ‘general advice’ in the financial services sector as misleading.

In its recently released draft report on competition in the Australian financial system, the Commission made a draft recommendation that ‘general advice’, as defined in the Corporations Act, should be renamed.

“Currently, the terminology of advice requires consumers to intuitively understand that general advice is like marketing; and personal advice is actually tailored to their situation and carries with it some protection against misuse,” the report stated.

“To ensure consumers are able to clearly distinguish between general promotional effort related to products and actual personal advice, use of the term ‘advice’ should be limited to effort that is undertaken on a client’s behalf by a professional adviser,” it added.

The Productivity Commission stated that it supported the testing of alternative terms for ‘general advice’ with consumers “…to ensure that misinterpretation and excessive reliance on this type of promotional information is minimised”.

The report stated the costs of rebadging existing ‘general advice’ products would not be substantial as any related electronic documentation would already be updated regularly.

  • Old Risky

    At long last someone with authority has belled the cat.

    Every risk adviser in this country knows the abuses that go on with General Advice,
    as delivered by non-planners in the banking industry and by the TV -direct
    product floggers.

    ASIC refuses to admit there is an elephant in the room with General
    Advice. They think the provision of a couple of approved scripts to the call
    centres run by the product floggers solves the problem. Apparently no one from ASIC
    ever rang one of those call centres and pretended to be a genuine client just to see how that script is quickly abandoned. ASIC has never been explained how a caller is “better-off” by purchasing a complex life insurance product such as income protection over the phone from a product flogger, and not from a “personal advice “ adviser. There are no savings, just horrendous contracts!
    Oh BTW, the banning of General Advice should apply to NFP industry funds, with Pre-Existing exclusions on default cover, all done under one of ASICs little General Advice Exemptions

    • Anthony Squire

      I cringe every time I see an ad with a call centre operator saying “…and you have accidental cover for the first 3 months, so real security in case the unexpected…” Just another “General Advice”, which I call “marketing from a negative”.

  • Scott

    A good initial starting point that will never come into force due to ASIC and the Government not understanding the industry. It’s not general advice, its product selling and that is what it should be called. I agree it should be extending to super funds as well as the dodgy TV ads.