General advice is financial information delivered in a way that is informative
to a client but does not take their personal needs or circumstances into account.
In other words, a client who is actively looking for life insurance will receive information on that specific topic, but not specific to them.
A 60 year old with savings, a healthy superannuation and no dependants, for example, would receive the same information as a 30 year old client with minimum super, no savings and three dependants.
Both clients would be talked through the benefits of each type of insurance on offer, how insurance types are designed to work and then invited to make their own decisions, considering their personal circumstances.
General advice can be an incredibly efficient advice model, helping your clients understand the complexities of insurances, how they work, when they work and the types of protection they can provide. However, it stops short of advising what they should actually do.
The responsibility for that decision remains firmly with your client, and that point needs to be made clear at the start.
For those advisers who’ve been giving personal advice for many years, it’s a significant shift in perspective. Your experience and knowledge can be harnessed in a way that gives your clients confidence to make informed decisions on their own, without the need for direct, personal advice.
“General advice delivered correctly, for me is about educating my clients. Each of the insurances, features, benefits and structures are explained, information on things to consider when building a suite of insurances. The client is asked for direction: which of these products could help meet your needs? What levels would you like to be quoted on? Which structure is appropriate for you? It puts the ball in their court.”
Russell Sheasby, Adviser
You’ll find the general advice definition in Section 766B(4), and it states that general advice is ‘financial product advice that is not personal.’ It goes on to explain that you need to hold an AFS licence, and you can ‘give general advice to clients, provided that you give a general advice warning under s949A(2).’
This requires a clear and solid understanding of personal advice. Our business model, platform and team are here to keep you on track and on the right side of the regulations.
The general advice warning is key to establishing the right relationship with your client up front, and by communicating that the information is not personal advice, so that everyone is clear from the start.
Sometimes it’s important to clarify this with some clients, provide examples and look for a solid understanding. This can be done by explaining where the limitations of general advice sit, and reiterating that where there is a need for personal advice, personal advice should be considered.
The Corporations Act goes further with its general advice definition, and explains the nature of the general advice warning as follows.
General Advice Warning s949A(2):
The providing entity must, in accordance with subsection (3), warn the client that:
(a) the advice has been prepared without taking account of the client’s objectives, financial situation or needs; and
(b) because of that, the client should, before acting on the advice, consider the appropriateness of the advice, having regard to the client’s objectives, financial situation and needs; and
(c) if the advice relates to the acquisition, or possible acquisition, of a particular financial product–the client should:
(i) if the product is not a CGS depository interest–obtain a Product Disclosure Statement (see Division 2 of Part 7.9) relating to the product and consider the Statement before making any decision about whether to acquire the product; or
(ii) if the product is a CGS depository interest–obtain each information statement (see Division 5C of Part 7.9) for the class of CGS depository interests that includes the product and consider the statement before making any decision about whether to acquire the product.
If you’re considering the move to general advice, we know it can be daunting. We’ve made understanding ASIC’s regulatory framework our business and built a General Advice Platform with this in mind.
Find out how it works here.
Find out how our general advice model that integrates a CRM system, business process and compliance solution can work for you.
