In a submission to the Australian Law Reform Commission’s Financial Services Legislation: Interim Report A, the SMSF Association said there needs to be better clarity around the terms used to describe advice and the provision of factual information.
The submission stated that the term “financial product advice” is not appropriate and is not representative of many of the advice services that are provided by licensed advisers.
“In our sector we have a number of licensed advisers who provide strategic advice. Some of those are full service financial advisers who may provide both strategic and financial product advice. Others may hold a limited licence that expressly prohibits specific product advice, limiting advice to class of product advice only,” the submission explained.
The submission also pointed out that significant confusion arises around the use of the term “general advice”.
“Consumers will often interpret general advice as advice that does have regard to their personal circumstances. Adding to that confusion is the nuanced differences between the provision of factual information and general advice,” it stated.
In order to provide clarity, the SMSF Association said the term general advice should be removed.
“Advice should be advice, whether it is simple, scaled, or comprehensive advice. This should be clear and distinct from the provision of ‘factual information’,” the submission said.
“Providing clarity around these terms and moving away from solely product-based definitions and frameworks is more representative of the diversity of service providers across the sector. It also provides an opportunity to reshape and simplify the definitions and provisions, with a best interest duty and client first, outcomes driven approach.”
The submission said this would pave the way for a broader policy review on how advice can be given or delivered to clients.
The SMSF Association also noted in the submission that it had seen an increasing number of “unnatural” terms appearing in the legislation.
“They are not engageable, relatable and do not align with the intended meaning or use. Terms need to be simple and clear,” it said.
“Recent examples are seen in the Better Advice Bill where we saw the introduction of the term ‘qualified relevant tax provider’. For a consumer, this term has no relevance or direct meaning. This was the term chosen to replace the tax (financial) adviser definition when tax registrations for financial advisers moved from the Tax Practitioners Board remit under the Tax Agent Services Act 2009 to ASIC under the Corporations Act 2001.”
