A research report commissioned by ASIC, REP 614 Financial Advice: Mind the Gap, has found that consumers have difficulty in distinguishing between general advice and personal advice.
ASIC has released the findings of research it commissioned into consumer awareness and understanding of general and personal advice.
The research was conducted by Whereto Research, an independent market research agency, and was based on the results of an online survey completed by 2,545 participants, four group discussions with seven to eight participants in each group and 34 in-depth interviews.
The participants consisted of Australians aged 18 years or older, with a focus on those that had received financial advice in the last two years, those who had thought about but postponed getting financial advice within the last two years and those who intended to get financial advice in the next two years.
The results of the research indicated that general and personal advice are not familiar concepts when consumers think of financial advice, and are not used as a frame of reference when consumers consider getting advice.
The results of the qualitative and quantitative research show that, even when prompted with the terms general advice and personal advice, participants had difficulty distinguishing between these types of advice, the report stated.
“When participants in the online survey read two advice scenarios and selected which type of advice was being provided, only 53 per cent of participants correctly identified the general advice scenario, even though the general advice warning was given in the scenario,” the report said.
“Just 19 per cent of participants correctly identified the personal advice scenario. Most either thought that the personal advice scenario was general advice or a mix of both types of advice.”
Conversely, 14 per cent of participants thought that the general advice scenario represented personal advice and 34 per cent thought that the personal advice scenario represented general advice.
ASIC said in the report that it is seeing an increasing use of general advice models, or purported general advice models, to distribute financial products.
“We expect this trend to continue as the professionalisation of the personal advice industry leads to the separation of personal advice from financial product sales,” it said.
ASIC said that it has seen some poor conduct in relation to general advice distribution models, including aggressive sales tactics in telephone sales of direct life insurance under general advice models.
It is also seeing poor conduct in relation to general advice, with marketing recommendations being made to consumers to open a new superannuation account and to roll over existing superannuation funds into a particular fund immediately after asking the consumer questions about their objectives, financial situation and needs.
The promotion of SMSFs under general advice models to invest in “inherently risky ventures such as leveraged property purchases or foreign exchange trading” was identified as another area of poor conduct.
“Fewer obligations apply when general advice is being provided as opposed to personal advice. This means that general advice sales models increase the risk of consumers buying products not suited to their needs or making inappropriate switching decisions,” the report said.
Further, irrefutable proof that regulation has not, cannot, will never work. ASIC is not part of the solution, they ARE the problem. Consumers don’t need protection from bad advisers, a free and open market will do the heavy lifting, they need protection from ASIC – fooling consumers into believing they’ve got their back. The only thing that should be banned in ASIC, and the world will be a far, far better place.
Lets make a system so complicated that no one understands it especially the people its supposed to protect. Sounds pretty typical. Oh and lets let the little professionals pay for the regulation of this industry while we let the big banks do what they want.
Agree with Product Information. Eliminate the use of the term Advice in more than one category. You can get Product Information from Product Issuers or you can get Personal Advice from Independant Advisers. To be Personal Advice clearly your individual circumstances, objectives and needs must be appropriately considered. Further to make Personal Advice independent Vertical Integration must be removed from the industry.
ASIC morons – General Advice is one of the most stupid concepts ASIC have allowed and given how many stupid things ASIC do that is saying a lot.
General Advice = PRODUCT INFORMATION.
It is not advice and should never have been allowed to be called Advice.
The Banks and Insurance Companies have of course totally abused this rubbish of General Advice to flog products with zero AFSL compliance.
ASIC wake the Hell up – get rid of General Advice and call it PRODUCT INFORMATION !!!!!!!
Totally agree. This is All ASIC’s fault. ASIC comes out with statements of “poor conduct”. They’re the ones who created this by allowing General Advice. The GA providers haven’t done anything wrong – they’re simply playing within a foolish framework established by ASIC.
Kym Bailey – touche! Advisers are regulated to the point of insanity – to the detriment of the public. What a perverse outcome. Change is indeed needed.
Finally, ASIC has road tested the concepts of general v personal advice in the real world (not the world supported by an army of legal personnel) and, concluded there may be confusion.
The concept is hard for professionals to grasp let alone the public who are the consumers. The general advice warnings are ridiculous, to say the least, and it is unsurprising that they didn’t help those surveyed here to distinguish what type of advice they were given.
Advice delivery should be first and foremost about helping people to obtain a good or service that is appropriate for them. Compliance should be a support framework, not the grand ballroom of the ‘house of advice’.
Like many parts of Chapter 7, a rethink is needed.
Kym, they may have tested the concept and come up with the result that anyone could have told them, however I highly doubt they will do anything about it due to a combination of the powerful influences of firms (including industry funds and banks) that hide behind general advice when making money for themselves and ASIC’s own incompetence. It should be changed, it is not clear but realistically I don’t expect anything to happen.