A recent report released by the Australian Securities and Investments Commission (ASIC) has outlined the problematic fact that consumers don’t understand the difference between the garden varieties of advice: general or personal.
This leaves consumers at risk of making unsound financial decisions.
Karen Chester, ASIC’s deputy chair, said the gap was ‘disturbing’, particularly in light of the false idea consumers may have that they are receiving personal financial advice, when they are, in fact, receiving general advice.
The survey revealed that consumers don’t understand the difference between general and personal advice, with 53 per cent correctly identifying general advice. When provided with a general advice warning, 40 per cent of those surveyed believed that the adviser must take their personal circumstances into account.
The report highlights the issue with misleading terminology, with the FPA recently calling on the government to remove any reference to ‘general’ advice, since it is not actually advice, but more accurately, general information.
Advisers are required to act in the best interests of their clients and do not provide inappropriate advice, but this does not apply to general advice, which can be given by a bank employee, for example.
The report was commissioned by ASIC using a research agency. The agency used hypothetical scenarios to test whether a consumer knew if they were receiving general or personal financial advice. Further research has been planned.