‘Mind the gap’ – consumers confusing different types of financial adviceMarch 28, 2019
ASIC today released new research revealing many consumers confuse ‘general’ and ‘personal’ advice exposing them to greater risk of poor financial decisions.
The ASIC report, Financial advice: Mind the gap (REP 614), presents new independent research on consumer awareness and understanding of general and personal financial advice, identifying substantial gaps in consumer comprehension.
“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,” said ASIC Deputy Chair, Karen Chester.
Millions of Australians will likely seek financial advice at some stage in their lives. When they do, it is critical they understand whether that advice is personal, whether it is tailored to their circumstances and does the adviser have a legal obligation to act in their interest. “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,” Ms Chester said.
The report highlights the importance of consumer awareness and understanding of the distinction between personal and general advice with the Future of Financial Advice (FOFA) protections only applying when personal advice is provided. These include obligations for advisers to act in their client’s best interests, to provide advice that is appropriate to their client’s personal circumstances and to prioritise their client’s interests. These obligations do not apply when general advice is provided.
“The survey also revealed that the responsibilities of financial advisers, when providing general advice, is not well understood. Nearly 40 per cent of those surveyed were unaware that advisers were not required by law to act in their clients’ best interests,” Ms Chester said.
ASIC anticipates the need for financial advice to grow, reflecting an ageing population and many financial products, especially retirement products, becoming more complex. ASIC reports that much of the advice is likely to be general advice, and while appropriate in some circumstances, it is inevitably of limited use.
“ASIC is seeing increased sales of complex financial products under general advice models – so not tailored to personal circumstances – leaving many consumers, especially retirees, exposed to the potential risk of financial loss. And whilst the Financial Services Royal Commission, and the Government’s response, dealt with the most egregious risks of hawking of complex financial products, consumer confusion about what is personal and general advice needs to be addressed,” Ms Chester said.
The report’s findings reinforce those of the Murray Financial System Inquiry and the Productivity Commission reports on the financial and superannuation systems. Those reports made recommendations about the use of the term ‘general advice’, which is likely to lead to false consumer expectations as to the value of and protections afforded advice received.
Ms Chester said, “This consumer research is timely. It comes as the Government is considering policy recommendations on financial advice from the Productivity Commission’s twin reports on Australia’s financial and superannuation systems. And at a time when the financial system itself undergoes much change, following the intense scrutiny of the Financial Services Royal Commission, including considering new financial advice and distribution business models”.
The report includes quantitative and qualitative research commissioned by ASIC and undertaken by independent market research agency, Whereto Research. The research used hypothetical advice scenarios to test consumer recognition of when general and personal advice was being provided, and awareness of adviser responsibilities when being given each type of advice.
Report 614 Financial advice: Mind the gap is the first stage in ASIC’s broader research project into consumer experiences with and perceptions of the financial advice sector. Additional research by ASIC will get underway in 2019 to identify a more appropriate label for general advice and consumer-test the effectiveness of different versions of the general advice warning.
Subscribe to our newsletter
- IPO watch mid year report July 21, 2021
- Intergenerational Report (IGR) July 01, 2021
- ASIC review of 31 December 2020 financial reports June 16, 2021
- 21-129MR ASIC highlights focus areas for 30 June 2021 financial reports under COVID-19 conditions date of release 10/6/2021 June 10, 2021
- HLB’s quarterly newsletter June 08, 2021
- 2021-2022 Federal Budget May 12, 2021
- Climate change risk disclosures and governance of the ASX50 in 2020 May 11, 2021
- ASIC quarterly update January to March 2021 May 06, 2021
- Firms offering debt management services require credit licence to operate May 05, 2021
- New SME Recovery Loan Scheme March 12, 2021
- Federal Government releases guidance to help businesses and employees better understand their rights and responsibilities in relation to the COVID-19 vaccination in the workplace March 02, 2021
- 2021 IPO Watch Report January 29, 2021
- ASIC highlights focus areas for 31 December 2020 financial reports under COVID-19 conditions December 15, 2020
- ASIC to further extend financial reporting deadlines for listed and unlisted entities and amends ‘no action’ position for AGMs November 11, 2020
- Federal Budget Report 2020-21 October 07, 2020
- Protection for bankruptcy extended September 09, 2020
- ASIC provides relief for companies planning an initial public offering August 27, 2020
- JobKeeper changes to be aware of from 3 August 2020 August 17, 2020
- IPO Watch Mid-Year Report July 24, 2020
- PCP extends platform company eligibility July 22, 2020
- PCP share facilitation company Sharetech now open for business July 22, 2020
- How to deal with COVID-19 in the reporting season July 13, 2020
- financial reporting news and insights June 30, 2020
- End of Year Tax Planning Guide – 2019/20 June 02, 2020
- COVID-19 | Reporting deadlines further extended for listed and unlisted entities May 14, 2020
- COVID-19: Signing contracts electronically just got easier for companies May 06, 2020
- ASIC reports on corporate finance regulation – July to December 2019 April 20, 2020
- JobKeeper Payment has now been legislated by Parliament April 14, 2020
- ASIC to provide additional time for unlisted entity financial reports April 09, 2020
- Coronavirus stimulus package to include jobkeeper payments March 31, 2020
- New ASIC guidelines for upcoming AGMs and financial reporting requirements in light of COVID-19 March 25, 2020
- Initial public offers: Relief for voluntary escrow arrangements and preprospectus communications February 24, 2020
- Financial Services Royal Commission Draft Legislation February 04, 2020
- 2020 IPO Watch Report January 30, 2020
- The execution challenge for a new decade January 21, 2020
- Australian Government delays implementation of Open Banking after facing practical issues with the new Consumer Data Right January 13, 2020
- ASIC reports on corporate insolvencies 2018–19 December 19, 2019
- ASIC Financial reporting focuses for 31 December 2019 December 06, 2019
- ASIC releases report on mining and exploration initial public offers December 05, 2019
- Final ASX listing rules reforms – summary of key changes November 12, 2019
- tokenized securities are the next big megatrend of the blockchain revolution November 06, 2019
- CDR privacy safeguards: OAIC guidance released November 06, 2019
- Financial Services Council releases guide to help stop elder financial abuse October 31, 2019
- Final ASX listing rules reforms October 11, 2019
- ATO celebrates 20-year milestone of regulating self-managed superannuation funds October 10, 2019
- ASIC reports on corporate finance regulation – January to June 2019 September 23, 2019
- Does your SMSF investment strategy meet diversification requirements?’ September 19, 2019
- ASIC’s Corporate Plan 2019-2023 August 28, 2019
- Government announces Hayne Royal Commission implementation timetable August 26, 2019
- Countdown to AGM August 20, 2019
- ASIC enforcement update January to June 2019 August 18, 2019
- ASIC Warns On Insider Trading In Small Cap Miners August 03, 2019
- APRA proposes stronger rules on remuneration August 01, 2019
- AASB 16 Leases – get it right as it may have a large impact on your financial reporting July 19, 2019
- FATF releases 2019 guidance on virtual assets: 9 key points and global changes July 18, 2019
- Major financial reporting changes and other focuses June 17, 2019
- ASIC issues guidance to licensees to protect against share sale fraud June 16, 2019
- ASIC consults on proposals to maintain investor protections by restricting retail offers of ‘stub-equity’ in control transactions June 04, 2019
- ASIC releases market integrity report May 31, 2019
- ASIC updates information for businesses on ICOs and crypto-assets May 30, 2019
- Succession Planning May 14, 2019
- Large proprietary company thresholds increased April 16, 2019
- Australia passes new laws regulating streaming of abhorrent violent material by ISPs and other content providers April 15, 2019
- Federal Budget Review April 03, 2019
- ‘Mind the gap’ – consumers confusing different types of financial advice March 28, 2019
- Accounting and Financial Reporting Standards update March 27, 2019
- ATO & Council of Financial Regulators report on SMSF borrowing arrangements March 22, 2019
- fourth edition of ASX Corporate Governance Council’s Principles and Recommendations officially released. February 27, 2019
- ASIC consults on updating its responsible lending guidance February 14, 2019
- Final report of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry February 02, 2019
- ASIC reports on 2018 annual general meeting season January 31, 2019
- new mandatory wording requirements for service providers under the Australian Consumer Law January 30, 2019
- Protecting your PPSR Registration from Expiry January 30, 2019
- Findings from 30 June 2018 financial reports January 25, 2019
- Western Australia expands its duty base December 18, 2018
- Australian startup and young technology company funding report 2017/18 December 01, 2018
- proposed changes to the ASX Listing Rules December 01, 2018
- Plans to reduce the financial reporting burden for Australian proprietary companies. November 27, 2018
- The SEC reiterates its position on the issuance, trading and investment in digital assets November 23, 2018
- Three companies combining with a common vision of providing coordinated solutions for unlisted companies November 20, 2018