Last week, we discussed ASIC's consumer research into the potential benefits of a new label for general advice.
The regulator found that alternative labels - "general information," for example - made no discernible difference to how consumers interpreted the advice they were being given. Instead of specific wording, ASIC's research found that it was primarily the circumstances in which general advice was provided that influenced consumer misunderstanding.
Because of these findings, ASIC said it would not be making any recommendations to the Government about changing the label of general advice.
In a response, the FPA expressed its disappointment in ASIC's no-action position, arguing that while relabelling general advice is not a "silver bullet" to the problem, it is a necessary step in addressing the "harm caused by consumers misunderstanding the term ‘general advice'."
The FPA's statement continues: "Multiple Government reports have shown that consumers are confused about the difference between ‘personal advice’ and ‘general advice’, and often misunderstand what they are receiving."
Justifying this, the FPA pointed to the recent High Court decision against Westpac, which involved two Westpac phone campaigns allegedly encouraging customers to roll their superannuation into Westpac-affiliated super accounts. These campaigns, ASIC said at the time, resulted in a $650 million boost in Westpac's FUM between January 2013 and September 2016, and were interpreted by customers as being personal advice despite being presented as general advice.
To prevent future misunderstandings in this vein, the FPA reiterated its recommendation that the term "general advice" be changed to "product information" and "strategy information". These terms, the association said, "better [reflect] the definition and [are] less misleading to consumers."
The FPA added: "Any replacement must ensure that the term ‘advice’ can only be used in association with ‘personal advice’ – that is, advice that takes into consideration personal circumstances."
As we discussed last week, though, given that these misunderstandings seem to occur regardless of how the advice is labelled (or whether it's labelled at all), advisers will need to be much more careful in the future when relaying general advice to current and prospective clients.
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