QAR proposal raises potential risks for adviser marketing
The proposal to expand the personal advice definition could create some risks for advisers with their marketing materials such as client newsletters, according to BT.
Speaking in a recent podcast, BT head of financial literacy and advocacy Bryan Ashenden noted that one of the proposals in the Quality of Advice Review proposals paper is to essentially change the definition of what constitutes the definition of general advice.
“That would basically puts us in the position where it’s either advice or it’s not, and if it is advice, basically, it’s personal advice,” explained Mr Ashenden in an upcoming episode of the SMSF Adviser Show podcast.
“It’s interesting because the way it is defined in the proposal is similar to our existing personal advice definition — you’re making a recommendation or you’re providing an opinion about something. However, it states that as long as your making that recommendation or opinion about a financial product or about a class of financial products and you hold information about that client including information about their objectives needs and financial situation, then it’s deemed to be personal advice.”
While this proposal is good in one sense, said Mr Ashenden, as it gets rid of the blur between personal versus general, it could create risks for those times where advisers want to say or do things with clients that should not be regarded as advice.
“However, under this new definition, those things may potentially fall within that scope because we have that information.”
Mr Ashenden gave an example of advisers sending out a newsletter to their clients.
“The content in the newsletter might be sourced from a third party provider but it might say something like ‘the view from this research provider is that this particular stock is good value, so it’s a good stock to hold on to’”.
“Now the adviser in that sense is not the one that is really providing the recommendation, they’re just passing it on, but they hold information on the client.”
While the adviser may not be actually talking to that client about stocks, they hold information about the client and they’ve provided comments that talk about a financial product, he said.
“Is that now captured as personal advice? While we won’t have to provide an SOA and all those other all compliance requirements [under the other proposals put forward in the paper], it still raises a question around everything an adviser does or says with an existing client,” he cautioned.
“So while it does make things simpler in terms of the definitional aspect of it, we’ve still got complications that would need to be worked through in terms of how it will work and what gets captured.”
Bryan Ashenden will be providing the latest policy and legislation updates for SMSF advisers at the SMSF Adviser Technical Strategy Day 2022. The conference be held on Thursday 6 October at Crown Towers in Melbourne, Friday 14 October at the Four Seasons Hotel in Sydney, and Wednesday 26 October at the Brisbane Convention and Exhibition Centre.
For more information about the conference, including agenda and speakers, click here.