Opportunity to cash in on general advice

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The door has opened for financial advice businesses to expand and provide scaled advice thanks to the proposed lifting of the FoFA ban on conflicted remuneration for general advice.

This is according to Claire Wivell Plater, the managing director of The Fold Legal, which helps financial services to manage their legal, regulatory and commercial challenges.

“General advice is another form of scaled advice. We see an opportunity for financial planning businesses to offer general advice – for example, to clients who want to make their own investment decisions or who don’t want to pay for a full advisory service,” said Wivell Plater. “This would allow financial advice businesses to introduce a general advice model for this type of client.”

This advice could be provided via the internet, telephone, or in person, and if the business then arranges for the client to acquire the financial product, they will be remunerated by commission for the services, she said.

Advisers must be careful, however. In full service and ongoing advice relationships where the client expects and pays for the adviser to recommend strategies and investments that will achieve their personal goals, the advice can only be personal.

“Businesses that want to provide general advice need to have a detailed understanding of when advice is considered general and when it is considered personal,” Wivell Plater said. “If a client reasonably believes they have been provided with personal advice, then the advice will be considered personal, even if the adviser intended to give general advice and even if the adviser thought it was general.”

Statements of Advice also aren’t required when general advice is given, however few full service financial planners or licensees will rely on this because they won’t want to run the risk of breaching the AFS regime.


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