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The danger zone between general and personal advice

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Advisely-Team
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6 months ago

When ASIC claimed victory over Westpac breaching financial services laws pertaining to the provision of personal advice what has it clarified? Well, first off, it could cost an adviser dearly

This article has been taken from the NMP education library which has now moved to Advisely

The breaches involved two Westpac phone campaigns allegedly encouraging customers to roll their superannuation into Westpac-affiliated super accounts. These campaigns, ASIC said, resulted in a $650 million boost in Westpac’s FUM between January 2013 and September 2016. What was in contention was whether or not these campaigns could reasonably be interpreted as personal advice.

The Corporations Act defines personal advice as being advice where:

  • the provider has considered one or more of the person’s objectives, financial situation and needs, or
  • a reasonable person might expect the provider to have considered one or more of those matters

It is the second point that stirred up trouble for Westpac. The High Court found that a “reasonable person” might have expected the phone campaign to have considered their “objectives, financial situation and needs” for three reasons:

  • first, each phone call was a “personal communication to a member” that “specifically related to the member’s personal financial situation in relation to his or her superannuation”.This was compounded further by callers asking members about their super-related financial objectives, such as whether or not they wanted to save on fees, improve “manageability” by consolidating accounts and so on

 

  • second, that a reasonable person might have seen the “free-of-charge” roll-over service as being attributable either to “fees already paid by the member or to Westpac’s business development”

 

  • third, and perhaps most importantly, that the law specifies that personal advice has been given when a provider has considered “one or more” of a person’s objectives, financial situations and needs, not necessarily all of them.Given that members called were asked about their objectives (as explained in the first point), the court found that “each member might reasonably think that Westpac considered that acceptance of the roll-over service was apt to realise the objectives the member had stated.”

ASIC commissioner Danielle Press described the High Court’s decision as “[providing] clarity concerning the differences between personal advice and general advice.”

So what has it clarified? Well, first off, providing personal advice that’s intended as general advice (even accidentally) could cost an adviser dearly. It also suggests that the kind of disclaimers offered by many AFSLs regarding general advice – including those offered in Westpac’s phone campaigns – might not be enough if a reasonable person could interpret the advice as being personal. 

This is a serious issue to consider if you, like many advisers now, are using mass marketing/communications campaigns to reach out to current or prospective clients. Whether it’s via email, social, phone or some other channel, you run the risk of these campaigns being interpreted by customers (and possibly the courts) as personal advice if you aren’t clear enough.

As Press put it: “By clarifying the distinction between tailored, quality, personal advice in the customer’s interest, and general advice given via a sales campaign, [the High Court’s] judgement will provide clear guidance to those financial institutions that develop campaigns to sell financial products through direct approaches to retail clients.”

She added: “ASIC will continue to bring enforcement action against misconduct, including advice that is not in the best interest of clients. As noted by the High Court, consumers’ decisions regarding superannuation accounts are ‘significant financial decision[s]’ and ASIC has a focus to lift standards in this area.’”

Is it time to review your comms strategy? 

 

Updated 6 months ago
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