Consumers misunderstand types of advice

The need to be studious about our financial future never goes away and ASIC is pushing hard to help us all understand this.  Advice is very important but so to is having a good understanding of what is being proposed. 

 

 

The latest Australian Securities and Investments Commission (ASIC) research has revealed a basic misunderstanding among consumers of what constitutes general financial advice and what constitutes personal financial advice.

Commenting on the corporate regulator’s “Financial advice: Mind the gap” report, ASIC deputy chair Karen Chester said: “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.”

Results of the study showed 53 per cent of respondents correctly identified general advice and 40 per cent of those surveyed incorrectly believed the adviser had an obligation to take their personal circumstances into account when providing general advice.

The regulator has identified this lack of knowledge regarding the different types of advice as presenting significant risk to consumers as with the continued evolution of financial products.

“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 while 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,” Chester said.

ASIC said it regards the results of the report as a reinforcement of the Financial System Inquiry findings that found the use of the term general advice is likely to lead to unrealistic consumer expectations about the value and level of protection available to them when seeking financial planning services.

“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,” Chester said.

The study was conducted by independent firm Whereto Research and asked participants to identify what type of advice was being provided in hypothetical situations.

 

Darin Tyson-Chan
March 28, 2019
smsmagazine.com.au

 

 

  • A positive pension change with a cash rate twist

    Later this month around 630,000 Australians currently qualifying for a partial age pension will receive a welcome fortnightly payments boost.

  • Shares to remain volatile as trade war heats up

    Shane Oliver - Investors should expect more sharemarket volatility over the next year as the trade war between the US and China ratchets up, according to AMP Capital.

  • NALI, LRBA measures pass Parliament

    The government’s further restrictions to non-arm’s length income and LRBAs have passed Parliament, meaning SMSF trustees approaching retirement with an outstanding loan on a property will need to consider their options when planning contribution strategies for the 2020 financial year.

  • Interest rising in SMSF set-up

    Interest in setting up an SMSF among those in APRA-regulated super funds is on the increase, while the average balance and age of new SMSF trustees have declined, according to Investment Trends data.

Read more latest Financial Planning news articles

General Advice Warning

The information provided on this website has been provided as general advice only. We have not considered your financial circumstances, needs or objectives and you should seek the assistance of your adviser before you make any decision regarding any products mentioned in this communication. Whilst all care has been taken in the preparation of this material, no warranty is given in respect of the information provided and accordingly neither Retirewell Financial Planning nor its related entities, employees or agents shall be liable on any ground whatsoever with respect to decisions or actions taken as a result of you acting upon such information.