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New ASIC guidance on financial product advice

Advisers giving the 'general advice' warning required by the Corporations Act do not need to use the exact wording in the Act. Indeed, ASIC encourages advisers to put the warning in their own words to make it meaningful for clients.

'General Advice' warning can be flexible

TIP: If you're giving advice, then you can help protect yourself by following ASIC's suggestions that advisers:

  • incorporate the warning messages in the substance of their general advice - rather than in the 'fine print';
  • and consider any particular communication issues (for example, the client's age, culture or education) that may affect aclient's understanding.

ASIC says the test for whether an adviser has given an adequate warning is whether the adviser has conveyed the substance of the Act in a way that is likely to be understood by the client.

See ASIC release QFS 157.

Advice can be 'general' even if adviser has 'personal' knowledge

ASIC has stated that even if an adviser has information about a client's personal circumstances, then the adviser can still give advice to that client that will be considered 'general advice'.

ASIC's test for whether the Adviser has provided 'personal' financial product advice is whether:

  • the adviser has considered one or more ofthe person's objectives, financial situations or needs; or
  • a reasonable person might expect that theadviser has considered one or more of these things.

Essentially, the important question is not whether the adviser possesses any personal information about the client, but whether the adviser took that information into account in providing their advice.

This of course raises the question - how would anyone ever know?

ASIC's starting position is that they will treat financial product advice as 'general' advice, unless the facts suggest otherwise. To determine this, ASIC will look to see if there was conduct suggesting:

  • the adviser intended the client to rely onthe advice as though it were personal advice, or
  • an expectation by a reasonable person thatthe client could rely on the advice as though it were personal advice.

ASIC has outlined several examples of activities which it is unlikely to regard as 'personal advice'. These include:

  • a mail-out to an entire client list, forexample, periodic newsletters or a report assessing various financial products;
  • an investment seminar for all clients,provided that the adviser does not:
    • use language in the seminar thatsuggests that they have considered the personal circumstance of the client in preparing the seminar;
    • deviate from the prepared seminar inresponse to audience comments or questions that gives the impression that personal financial advice is being provided; or
    • investment seminars for particular clientgroups, so long as the 'targeting' is again directed at a broad client grouping, and the seminar does not stray into the field of personal financial advice in response to audience comments or questions.

Of course, in these situations, a general advice warning should be provided and advisers should be careful to consider the specific circumstances of the situation.

TIP: When conducting mail-outs or hosting seminars, establish sound guidelines early on and stick to them.

See ASIC release QFS 158.


Lawyer in Profile

Paul Ellis
Paul Ellis
Special Counsel
PH: 61 3 9258 3524

Paul is a Special Counsel in the Maddocks Commercial team with particular expertise in commercial agreements for the supply of goods and/or services, the Personal Property Securities Act 2009, the National Consumer Credit Protection Act 2009 and the National Credit Code and the Australian Consumer Law.

Paul's key areas of practice include:

  • Australian Consumer Law;
  • credit and securities law;
  • commercial law and contracting;
  • government contracts; and
  • trust and superannuation law.

Before joining Maddocks, Paul was employed for 13 years with the Victorian Department of Justice, principally as a Deputy Registrar in the Victorian Magistrate's Court, but also as a legislation, policy and project officer for the Department.