March 29, 2019
ASIC has released research demonstrating consumers have difficulty in understanding the difference between general and personal advice, which it says exposes them to a greater risk of poor financial decisions.
The regulator says its report, ‘Financial advice: Mind the gap‘, identifies substantial gaps in consumer comprehension and understanding of general and personal financial advice.
Raising concerns over these findings, ASIC Deputy Chair, Karen Chester, noted, “This disturbing gap in understanding whether the advice they are getting is personal or not means many consumers are under the false premise their interests are being prioritised, when no such protection exists.”
Chester added that the survey not only revealed consumers are not familiar with the concepts of general and personal advice, but only 53 per cent of those surveyed correctly identified ‘general’ advice: “And even when provided the general advice warning, nearly 40 per cent of those surveyed wrongly believed the adviser had an obligation to take their personal circumstances into account,” she said.
Chester added that the report highlights the importance of consumer awareness and understanding of the distinction between personal and general advice, in which FoFA protections only apply when personal advice is provided. She said these include obligations for advisers to:
- Act in their client’s best interests
- Provide advice that is appropriate to their client’s personal circumstances
- Prioritise their client’s interests
“These obligations do not apply when general advice is provided,” said Chester.
…general advice…is inevitably of limited use
In what may be considered encouraging news for the advice sector, ASIC says it anticipates the need for financial advice to grow, reflecting an ageing population and many financial products, especially retirement products, becoming more complex. It considers that much of the advice is likely to be general advice, and while appropriate in some circumstances, is inevitably of limited use.
In acknowledging that “…consumer confusion about what is personal and general advice needs to be addressed,” ASIC notes this report is the first stage in its broader research project into consumer experiences with, and perceptions of, the financial advice sector.