Legislation Seeks to Rename General Advice

Legislation to restrict the use of the term ‘advice’, so that it only applies to situations where a person’s individual circumstances are taken into account, has been introduced to the Senate.

The Private Member’s Bill, titled Corporations Amendment (Financial Advice) Bill 2014, was tabled by Green’s Senator Peter Whish-Wilson in Parliament this week. According to the accompanying Explanatory Memorandum, the Bill seeks to ensure that the term ‘advice’ can only be utilised in reference to financial advice that takes into account the personal circumstances of the consumer. Any ‘general advice’ would instead have to be termed ‘general information.’

The Bill also mandates that when ‘general information’ is provided to a retail client, the client must be warned that the information is not advice.

Senator Whish-Wilson, who has been highly critical of the Government’s Future of Financial Advice (FoFA) amendments, said the Bill was a small step in reforming the legislation that governs the financial industry, by providing consumers with a clear differentiation between personal and general advice.

This will provide greater clarity for consumers

“This will provide greater clarity for consumers and they will better understand when the advice they are given is tailored to their personal circumstances or when they are simply being told about a product.

“I hope that the banks and the other parties will support the Corporations Amendment (Financial Advice) Bill 2014. It is a small, pragmatic and simple step towards restoring confidence in this important industry,” Senator Whish-Wilson said.

The Senator highlighted that the recent Senate Inquiry into the performance of the Australian Securities and Investments Commission and the Financial Systems Inquiry (FSI) have both raised concerns about this issue. The terminology used to define ‘general advice’ has also been the subject of numerous submissions to the FSI (see: Labelling of Advice Hot Topic for FSI).

Riskinfo will report further developments when debate on the legislation resumes.